Loan Is Clear to Close: What to Expect Next

Receiving “Clear to Close” is a significant milestone in the loan process, particularly for those navigating home buying. This status indicates the lender has completed its extensive review of your financial information and the property details. It signals your loan is on the verge of being finalized, moving you closer to homeownership. While it represents a major step forward, it is not the final action, and several important procedures still remain before the transaction is complete.

Meaning of Clear to Close

“Clear to Close” (CTC) signifies that a mortgage lender has finished all necessary underwriting conditions and is prepared to fund the loan. This means the lender has thoroughly reviewed and verified all required documentation, confirming the borrower meets the established criteria for the loan amount and type. It serves as the lender’s official green light, indicating the loan has received final approval and is ready for the closing appointment.

Before a loan reaches CTC status, the lender’s underwriting department undertakes a comprehensive evaluation. This involves meticulous checks of the borrower’s credit history, ensuring financial stability. The property undergoes an appraisal to confirm its value aligns with the loan amount, and a title search verifies clear ownership and identifies any potential liens or encumbrances. Additionally, the borrower’s income and assets are verified to ensure repayment capability. These processes confirm all conditions have been satisfied.

Final Review and Documentation

Once the loan is “Clear to Close,” the borrower enters a crucial preparatory phase involving reviewing final documentation. A primary document received is the Closing Disclosure (CD), a five-page form detailing the final terms of the mortgage loan and all associated closing costs. This document is mandated by the Truth in Lending Act-Real Estate Settlement Procedures Act Integrated Disclosure (TRID) rule, designed to provide transparency. Lenders must provide the CD at least three business days before the scheduled closing date, allowing ample time for review.

Borrowers should carefully compare the Closing Disclosure with the initial Loan Estimate. Scrutinize the loan amount, interest rate, projected monthly payments, and all itemized closing costs. Confirm that fees, such as origination charges and third-party services, align with what was previously disclosed, noting any significant discrepancies. Also check for correct personal information, property details, and understanding any escrow account details.

Beyond the Closing Disclosure, borrowers may also review drafts of other important documents like the promissory note and the mortgage or deed of trust. For home purchases, a final walkthrough of the property is recommended, typically conducted 24 to 48 hours before closing. This ensures the home is in the agreed-upon condition, any negotiated repairs have been completed, and all included fixtures and appliances are present and in working order.

The Closing Appointment

The closing appointment is the culmination of the loan process, where all parties finalize the transaction. Typically, the borrower, a representative from the lender, the title agent or closing attorney, and sometimes the real estate agents attend this meeting. The location often varies, ranging from a title company office to an attorney’s office, and in some instances, even remote or electronic closings are possible.

During the closing, the borrower will sign numerous legal documents that formalize the loan and property transfer. These include the promissory note, which is the borrower’s written promise to repay the loan with specific terms like the interest rate and payment schedule. The mortgage or deed of trust is also signed, pledging the property as collateral for the loan and outlining the lender’s rights in case of default. The final Closing Disclosure is signed, confirming acceptance of the loan terms and costs.

Funds are disbursed during or shortly after the closing. The borrower typically brings final funds for closing costs and any remaining down payment via a cashier’s check or wire transfer, as personal checks are usually not accepted for large sums. These funds, along with the loan proceeds from the lender, are distributed by the title company or closing agent to cover various expenses, including the seller’s proceeds, real estate commissions, and recording fees. Finally, the deed and mortgage or deed of trust are sent for recording with the local county recorder’s office, making the property transfer and the lender’s lien a matter of public record. This legally secures the new ownership and the lender’s interest.