The home buying process is just that: a process. In most cases, the loan applications can take four to six weeks or longer to complete, depending on the applicant, the financial institution, and other factors. Receiving a “clear to close” is the last step in the loan approval process. Once you’re cleared, it’s generally smooth sailing all the way to the closing table.
But what does clear to close mean? What happens after clear to close? And can your loan still be denied after clear to close?
What Does Clear to Close Mean?
Hearing that you’re “clear to close” is essentially the finish line for the home buying process. It means the lender has reviewed your application and conducted an in-depth analysis of your financial information to determine that you are a low-risk applicant.
Though you’ll be cleared to close three or more days before your scheduled closing, the entire process begins when you make an offer on a property. From that day on, the lender will work to gather all necessary information and documentation to get to this point – the official clear to close.
Think of it in terms of an airplane. If the buyer is in the cockpit, the lender would be like air traffic control, checking to ensure everything is safe before landing. Once they have checked everything – from the weather to other aircraft to making sure the runway is clear of debris – they’ll give you the OK to land.
A clear to close is the final notice that you are cleared to “land” at the closing table.
What Happens After Clear to Close?
Clear to close is the last crucial step before closing day, at least from a lender’s perspective. It’s just the final piece in a very long homebuying puzzle. (Learn more about the closing process here). Most likely, you’ve already waited several weeks while the lender completed the loan approval process. With the clear to close, the finish line is finally in sight.
When you receive clear to close, you’ll also receive a Closing Disclosure, which we discuss below.
So, what happens after clear to close? The answer should be very little. Once the lender completes underwriting and clears you to close, there shouldn’t be much to do but anxiously await closing day.
The Closing Disclosure
The Federal Consumer Protection Bureau mandates that lenders provide a Closing Disclosure at least three days prior to closing. This five-page document includes final figures regarding your mortgage amount, interest rate, monthly payment, closing costs, and other crucial information.
The Closing Disclosure shouldn’t contain any surprises. Your monthly payment and closing costs might be off slightly from the lender’s initial estimates, but the difference should be negligible. You receive this document several days before closing to give you time to review and ask questions about any discrepancies you find.
When you receive the Closing Disclosure, look it over closely. Make sure your name(s) are spelled correctly, that all financial information is correct, and that you are locked into the agreed-upon loan program. Once you sign this Disclosure, you cannot change it.
Can I Still Be Denied After Clear to Close?
If you are cleared to close, you can be fairly certain there won’t be any surprises before you reach the closing table. However, it’s not ironclad. There are still ways to be denied after clear to close, which would cause the entire deal to fall through.
Spending large sums of money, taking out new loans, or making other impactful financial decisions could jeopardize your loan. Buyers should always spend as little as possible between the time they put in an offer and the day they reach the closing table.
Large deposits into your bank account can also slow the underwriting process, thus delaying your clear to close. If you will be borrowing against an investment account or receiving large sums before closing, notify your lender.
To make sure your closing stays on track, heed the following advice:
- Stay in your current job.
- Do not make large purchases or take out new loans.
- Continue to make all your payments on time.
- Do not open or close new bank accounts or lines of credit.
If all goes according to plan, you’ll be the proud owner of a new property in just days! Congratulations on your new home!