Clear to Close: What Does This Mean?

 

You’ve received the news that you’re clear to close, and that can be as exciting as it is confusing. It does mean you’re nearly there, but some things need to occur before you can finally get the set of keys to your new home or investment property.

We’re glad to help clear the air and help you prepare for the final steps you need to take.

What does clear to close mean?

Clear to close means the lender is now ready to confirm the closing date with the title company or attorney. This also means you need to kick it into high gear and prepare for the closing date.

Before you are clear to close, you are to meet the lender’s required conditions. Having to get homeowner’s insurance and title insurance are typical examples. After completing the requirements, an underwriter approves the loan documents, and you are “clear to close.”

Can you be denied after clear to close?

Yes, you can still be denied after you’ve been cleared to close.

While clear to close signifies that the closing date is coming, it doesn’t mean the lender cannot back out of the deal. They may recheck your credit and employment status since a considerable amount of time has passed since you’ve applied for your loan.

If you open any credit lines and increase your debt or lose your job, the lender may deny the loan before closing.

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. That means you can take a sigh of relief and move forward.

Can I be clear to close if I have an FHA loan?

Clear to close means clear to close, and that means if you are using an FHA loan, the same rules apply even if the lender has different terms and conditions for you to follow.

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.

How long after clear to close can you close?

Normally within 3 days of receiving your closing disclosure.  While clear to close means the lender is ready to establish a closing date with the title company or attorney, you will likely receive the news by receiving your initial closing disclosure. You are to receive this document no more than three business days before closing.

In an ideal setting, if you receive this document on a Monday, you can expect to close on the property no sooner than Thursday. But weekends and holidays do not count as a part of the three days, and you may wind up receiving this letter four-to-five days before the closing date, sometimes longer.

Closing can be a painfully long process, which is precisely why you don’t need to waste time working with an inexperienced or slow-moving closing company. We understand that you’re eager to move into your new home, and offer our closing services and escrow services to help get you there as quickly as possible.

What do I do after being cleared to close?

Between receiving the closing disclosure and the closing date, it’s best to play it safe. As you know, your lender may still deny the loan. That means you should postpone taking lines of credit for furniture and other items or services until after closing.

The lender isn’t the only one who isn’t locked in yet. The loan is not final until you sign the papers at closing. Before you do that, you should take the time to look over the property and terms to ensure they meet your expectations.

Walking through the home and making sure no damages are present, and all negotiations between you and the seller have been settled or are underway is very important.

You need to review the funds you’re responsible for producing at the closing table. The number provided on your initial closing disclosure is a rough estimate but gives you a rough estimate of how much money you must prepare.

Before closing, you will receive the final closing disclosure, which provides you with the actual amount you are responsible for providing. From there, you are ready to move on to closing on your new home.