Since every human being on earth desires a place to live. Millions of people purchase property through the mortgage process. However, for this mortgage process to be swift and thrive through the approval phase, certain documents, investigations, and authorizations must be in place. This article focuses on the requirements and conditions that home buyers must meet before getting a mortgage. In addition, we look at the time requirement for clear to close from an underwriter and the 3-Day Rule relevant in a mortgage deal, which the home buyer must understand when reviewing and confirming mortgage funding with the seller/underwriter. All this should state a concrete assurance that the financial documents presented is an authenticated and certifiable originals.
What does clear to close mean?
Simply put, clear to close is defined as the final stage of loan approval from an underwriter after reaching the requirements and conditions for a mortgage.
A clear to-close can also refer to meeting the requirements and conditions of a mortgage transaction. At this point, your lender has thoroughly reviewed your documents and performed some verification. This will demonstrate that you meet the expectation of the loan amount requested by the borrower. Lenders will begin preparing for the closing day as soon as a buyer is clear to close. Your loan provider will set a date and time for your closing meeting and notify your seller, real estate attorney, and any other parties who intend to attend. Your lender will also gather the final documents that you will need to sign on the closing date. Finally, the Clear to Close approval will be accessible once they have complete all of the underwriting steps, such as analyzing your finances and completing a home appraisal.
Clear to close mortgage
Obtaining a clear to close is an essential step in the mortgage process. In essence, a clear to the close mortgage means that the underwriter has approved all loan documents, and the bank will fund your mortgage as long as your credit or employment status has not changed. It indicates that the lender has tentatively agreed to finance your loan and that you can proceed with your home purchase.
When you receive a closing disclosure, you are ready to close. In practice, you are ready to close the loan the moment the underwriter signs off on it, which takes about 24-72 hours. The problem is that you may not always be notified that you’re clear to close before receiving the closing disclosure.
What Is the Process to Get Your Loan Clear to Close?
Arriving at a clear-to-close requires significant work for both the lender and the borrower. Any mistake during the steps could make a big difference between a loan being fully considered and an applicant rejection. To get your mortgage settlement for its closing day, you’ll have to complete the following steps in advance:
#1. Provision of required documents
Before fully approving your application, your mortgage provider will need to look over a few documents while you wait for the underwriter to say “clear to close.” At first, your lender will want to see proof of your bank account and other assets, such as your monthly bank statements for the six months before you asked for the loan. You’ll need to present your current debt and monthly expenses. This will help your lender determine your debt-to-income ratio. Finally, it is possible that giving your underwriter written permission to access your credit score is the case.
#2. Make an offer
When buying a home, the seller must accept your offer on the property before you make it to closing day. Making an offer is never easy. Many factors affect the final amount you put on the table. It is critical to consider the current market value of the house. That is if there are any repairs to be made and there are buyers like you who are interested in the property for you to understand its value.
#3. Estimating and inspecting the property
Even though they serve two distinct functions, estimating and home inspections, the former determines the property’s fair market value, which a third-party company will do with a license. A confirmation that the property you are about to purchase is worthwhile. On the other hand, a home examination or inspection assists buyers in identifying issues with a home before purchasing it.
#4. Obtaining approval through underwriting
This procedure assists lenders in approving your loan. Underwriters will look at the documents you’ve sent them, as well as your income, debt-to-income ratio (DTI), credit history, assets, and the amount and type of loan you’ve asked for.
Going through these processes helps explain why it can take between 30 and 45 days on average to move from underwriting to clear to close. If you want to reach the “clear-to-close” position from the underwriter on time, make sure you prepare your documents ahead of time to avoid waiting; complete your mortgage application; satisfy all of your underwriting requirements as well as conditions to be met, and always maintain open communication with your lender.
The next step after you cleared to close
Immediately, there has been a notification from your underwriter that you are clear to close, and a massive portion of the mortgage process will be behind you. Although, a few pertinent stages still stand between you and property ownership.
#1. Closing Disclosure
Your loan officer will send you a Closing Disclosure once you have completed underwriting and conditional approvals. This five-page document outlines the terms and conditions of your mortgage agreement, providing a comprehensive overview of all the costs and fees you’ll incur when you sign.
Understanding your closing disclosure is a critical step in the home-buying process. Ensure you do not sign a document containing errors or provisions detrimental to your repayment plan.
#2. Final walkthrough
This is an opportunity for homebuyers to inspect the property before the official closing. When a buyer’s agent conducts a final walk-through inspection at closing time and finds out the repairs have not been done. There will be a notice to demand the seller to complete the repairs. In most cases, the house should finish by the time you do the final walkthrough. However, if anything is wrong with the house, this is your last chance to catch any issues before they become your responsibility.
#3. Closing day
After everything has been put in place, the long-awaited closing day will arrive. When you attend your closing meeting, the home title is officially taken back, and you become the new legal owner of the property. During this step, you sign all the paperwork, update the deeds, make your down payment, and pay the closing costs.
Waiting on Clear to Close From an Underwriter
Waiting on clear to close from an underwriter could be difficult once you’ve received the closing disclosure; you must wait at least 3 days before closing. This will give you the time needed to review the documents, ensure everything is correct, and prepare the checks you will need for closing day.
Within 72 hours of closing, some buyers may obtain a new credit score. There is a 3-day rule applicable to the waiting period after receiving the “clear to close” disclosure before signing your loan documents. The law allows you to review your final loan terms and talk to any experts you might need. While you’re waiting for the underwriter’s OK to close, any changes will need new explanations and could lead to your loan being funded.
Clear to Close 3-Day Rule
The 3-day rule is measured in days, not hours. As a result, the disclosure must be made three days before the sale rather than 72 hours before. Once they’re clear to close, most buyers won’t have to wait long to meet at the closing table. Keeping this in mind, you should allow at least the 3-day rule to take effect between receiving your closing disclosure and closing.
Note: if a federal holiday falls in three days, add a day disclosure delivery.
How Long Does It Take the Underwriter to Clear to Close?
Generally speaking, it takes 3–4 days for a loan officer or lender to complete the process. Although, this can easily be given more time if more information is requested.
Is Clear to Close Good?
Clear to close is good and an excellent opportunity for a buyer to be confident that the mortgage deal will get through. With an underwriter, once approved, especially if the document verification and the offer are certifiable.
Is It Clear to Close the Same as Closing Disclosure?
Receiving a closing disclosure means you are clear to close, but the terms aren’t entirely synonymous. Technically speaking, you are clear to close the moment the underwriter signs off on loan, and it can take between 24-72 hours from then to receive your closing disclosure. Where the confusion lies is that you may not always be notified that you’re clear to close before receiving the closing disclosure
Why do you have to wait three days after a clear to close?
The clear to close is a three-day waiting period. In this case, the CFPB golden rule requires the lender to give the borrower three business days to thoroughly review the closing disclosure to enable them to compare the charges to the estimation of the loan and ensure the cost and program they are obtaining are as expected.
Do lenders check bank accounts after clearing to close?
Yes, that is one of the final steps toward closing on your new property. Lenders check bank account statements, employment, credit report, and other essential documents to verify if what you submit is correct and not intended to deceive them.
Clear to close process and implementation can be expensive, frustrating, and time-consuming, but it will be mind-blowing if all reviews, terms and conditions, and requirements are in order. If the APR, loan product, or prepayment penalty changes after the borrower gets the Closing Disclosure, the borrower will need to get a new one. In that case, the lender must ensure that the Closing Disclosure is revised and a new delivery period and waiting period begin. The 3-day rule is in effect on all business days in clear to close disclosure, including Saturdays. Sundays and national holidays, however, do not count. This means you may have more than three days before the closing date to review the document.
Clear To Close FAQs
Is clear to close the same as final approval?
Clear to close means that an underwriter has approved your mortgage application, and you can now sign the loan documents. It’s not quite final approval, but you’re getting close. Obtaining a clear to close is a significant milestone in the mortgage process.
Do they check credit before clear to close?
Of course, a credit check will be required. Many buyers wonder if a lender will pull your credit more than once during the purchase process. Yes, the answer is yes. Lenders check borrowers’ credit at the start of the approval process and again just before closing.
How soon after closing is your first mortgage payment due?
Your first payment date is determined during the closing process. 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.