What Does Clear to Close Mean? 7 FAQs from Buyers
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You should acknowledge receipt of the disclosure with your lender. The document will contain information about your loan terms, monthly mortgage payments, closing costs, and loan calculations. Yes, it's possible for a loan to be denied after clear to close if your credit score drops or you lose your job. It's best to think of clear to close as approval that is contingent on your credit and employment, which the bank will check once more after clear to close.
Furthermore, find out what else you need to do before you can close. If things go smoothly, you’ll be in your newly bought home in no time. Lastly, if your lender has any questions about your finances or needs any additional documents or information, don’t panic. It’s probably a response to something that came up on one of these last minute “checks” to make sure nothing in your profile has changed. You can close on your new home 3 days after you are cleared to close. The steps you’ll take to be deemed clear to close are the lengthiest part of the home buying process.
Underwriting requirements
This article focuses on the requirements and conditions that home buyers must meet before getting a mortgage. All this should state a concrete assurance that the financial documents presented is an authenticated and certifiable originals. When buying a home, “clear to close” means the buyer has met all the conditions required to get the home loan. The buyer is now waiting for the final nod from the lender to finalize the deal. Once the lender approves and signs the mortgage documents, the buyer may ask the seller to schedule a day to sign and transfer the property. Finally, it is possible that giving your underwriter written permission to access your credit score is the case.
The average time to close a home is 47 days, from the day an application for a loan is submitted to the final signed documents. However, this number can fluctuate depending on your financial situation, your lender, and the seller who is moving away from the property. For example, if it takes longer for you to gather your paperwork and confirm your financial history, then you can slow down the closing process by several days.
Step 27 to Buying a Home: What Is Clear to Close?
After obtaining the real estate license in 2022, Kris joined eXp Realty and launched Homes by Ardor, the platform that was built to be the fastest way to buy or sell a house. Homes by Ardor also provides leads for its partner companies and realtors. Kris Reid is the CEO of Ardor SEO, a company that helps real estate professionals get more leads and customers to predictably grow their business. Again, you’ll want to close your deal as soon as possible to free yourself from the hassles, paperwork, and other real estate complexities. It is included with your First Payment Letter, along with payment instructions. The payment date is usually the first of the month after a full month has passed since the closing date.
Clear to close means the underwriter has approved the loan documents and the bank will fund the mortgage as long as your employment status or credit hasn't changed. Essentially, as long as you haven't taken on new loans, gotten fired, or started a new job, clear yo close means you're approved. You can close as soon as three days after being cleared to close, assuming you receive closing disclosure the same day. In most cases, you can expect to close 4 to 7 days after you're clear to close.
Final Walk Through
After you've cleared underwriting and conditional approvals, your loan officer will send you a Closing Disclosure. This five-page document outlines the terms and conditions of your mortgage agreement, providing a comprehensive overview of all of the costs and fees you'll pay when you provide your signature. Just because you are clear to close that does not mean you can now make large purchases on credit.
If your appraisal comes in at or above the contracted sale price, it should be smooth sailing. But, a low appraisal could leave you needing to renegotiate with the seller or come up with enough cash to cover the difference between the home’s appraised value and the sale price. You are only clear to close by meeting the lender’s conditions and should follow the same practices as those who are not using an FHA loan to purchase their home. If you don’t find yourself in these situations, it’s doubtful that the lender will deny your loan between clearing you to close and the closing date. If you open any credit lines and increase your debt or lose your job, the lender may deny the loan before closing. If there have been rough patches in your life that might have affected your financial history such as bankruptcy, divorce, or foreclosure, attach documents that vouch for the event.
If the home isn’t in the same condition than when you made your offer, you may delay closing until issues can be resolved. If you’re going back and forth with the seller on repairs needed based on the home inspection report, both the negotiations and the repairs themselves can slow down your closing timeline. Once the underwriter has determined that your loan is fit for approval, you'll be cleared to close. Once the Clear to Close is received, the attorneys will schedule the closing date, time and location and will notify us all once it has been scheduled. In addition, we’ll schedule the final walk through of your new home, which is usually conducted the day before closing.
Buying a house might be the best event of your life but it is certainly no walk in the park. From getting pre-approved for a home loan to closing a deal, buying a home requires energy, funds, and, most of all, patience. It takes an average of 30 to 45 days to close on a home, and that’s if everything is in its place. Any unwanted incident may cause the process to drag on longer than that.
In fact, 15% of buyers who used a mortgage to finance a home in 2019 obtained their mortgage through an online lender. Though, younger buyers are more likely to choose an online lender option. The biggest mortgage fraud red flags relate to phony loan applications, credit documentation discrepancies, appraisal and property scams along with loan package fraud.
Your closing meeting is when the home title officially transfers and you become the new legal owner of the property. Even if you buy the house as-is, a final walkthrough after you receive the Closing Disclosure is your chance to ensure the property is in the condition you and the seller have agreed upon. Walkthroughs aren’t technically a required step after you’re clear to close, but skipping out on a final inspection could be a costly mistake.
Underwriters will look at the documents you’ve sent them, as well as your income, debt-to-income ratio , credit history, assets, and the amount and type of loan you’ve asked for. Lenders usually require buyers to have homeowner’s insurance to protect their investment. However, even if your lender doesn’t require it, it would be in your best interest to get homeowner’s insurance anyway. With everything else in order, you’ll finally reach the long-anticipated closing day.
Home inspections, on the other hand, help buyers identify issues with a home before they purchase it. Do not change jobs, make purchases on credit or deposit large amounts of cash into your account,” says McKenzie-Sharpe. Any major changes in your financial situation, especially during a short span of time, can be a red flag to lenders.
The closing date will also have been finalized by now, and if everything looks good, it's just a matter of time before you formally close on the home. Also, don’t open or close any bank accounts or make any large transfers, deposits or withdrawals if you can help it. Clear to close is a sought-after marker on everyone’s journey to homeownership. To achieve that milestone as soon as you can – and hopefully with fewer headaches – organize your paperwork, keep your finances in check and keep your eyes on the clear to close prize. In 2021 Ardor launched the Icons of Real Estate Podcast to share proven strategies from the top producing icon agents with the real estate community.
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