Buying a home is an exciting affair. And one of the most exciting moments – besides getting your house keys – is learning that your mortgage has been declared “clear to close. ” Based on the name, you may think that means everything is complete and nothing else is needed.
Unfortunately, that’s not 100% accurate. There’s still plenty that needs to happen before you reach the closing table.
It’s a big deal when you hear that you’re “clear to close” on your mortgage loan. It’s been weeks of giving paperwork, waiting for approvals, and signing disclosures. When your lender confirms that you can go ahead with closing, it feels like the home stretch.
But before you celebrate and call the moving trucks, it’s important to understand what “clear to close” fully means – and what could still go wrong before you get the keys.
In this comprehensive guide, we’ll explain:
- What is “clear to close” and what it means for your loan
- The timeline between clear to close and closing day
- If a loan can still be denied after clear to close
- How to avoid issues that may put your final approval at risk
What Does “Clear to Close” Mean?
If your loan officer tells you that you’re “clear to close,” it means that the underwriter has looked over your application and agrees that you should get the mortgage loan. Specifically, being clear to close means:
- The appraisal value and your finances qualify for the loan amount and type
- Your credit, income, assets, and debts meet the lender’s requirements
- You’ve obtained homeowners insurance if required
- The title search came back clean or any issues are resolved
- Any required repairs from inspections have been completed
- Your employer has verified your employment
Essentially, you’ve met all the lender’s conditions, your file looks good, and you’re now just days away from closing on your mortgage.
You’ll be “clear to close” once you’ve been preapproved, made an offer, filled out the loan application, and been through underwriting.
It means you’re through the final hoops and the lender is ready to fund your loan. Now the closing process can begin.
The Timeline Between Clear to Close and Closing Day
Getting the clear to close notification starts the final countdown to closing day. But you’ll still need to complete a few more steps before you get the keys.
Here is a general timeline of what happens after you’re cleared to close:
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1-3 Days Later: Receive your Closing Disclosure with final loan details and closing costs. Review carefully.
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1-5 Days Later: Do a final walkthrough of the property (for purchases).
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3+ Days Later Sign loan documents at closing Documents go to lender for funding
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Closing Day: Lender sends funds to title company. You bring “cash to close”. Title transfers.
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Post Closing File signed documents with county Mortgage recorded Get keys!
The lender must send your Closing Disclosure at least 3 business days before signing. But the full timeline varies by state laws and other factors.
Many states give one to two days between “clear to close” and “funding.” Others mandate a 3-day wait. Closing can take 4-10+ days after getting CTC notification.
Can a Loan Still Be Denied After Clear to Close?
Now for the big question – once you get that coveted “clear to close”, can your lender still deny your mortgage loan?
The short answer is yes, it is still possible in some cases to get denied even after being cleared to close. Here’s why:
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Credit check: The lender often re-checks your credit right before closing to ensure no new negatives. If your score drops significantly or new debts appeared, they could deny the loan or require more funds from you.
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Job verification: Some lenders verify employment again right before funding the loan. If you lost your job, they may deny the loan.
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Financial changes: Major changes to your finances like new debts or assets could cause denial if discovered. Lenders may ask for bank statements right before closing.
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Loan audit: Some lenders use third-parties to re-validate your application details days before closing. If discrepancies are found, they may deny until resolved.
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Failing final walkthrough: For purchases, major issues found during the final walkthrough could allow the lender to pull out.
While rare, lenders reserve the right to keep checking for red flags between clear to close and funded closing. Most denials happen because of damaged credit or job loss.
How to Avoid Denial After Clear to Close
To avoid heartbreak from a last-minute denial, be extremely cautious with your finances after getting cleared to close.
Do:
- Review your Closing Disclosure and ask your lender questions
- Complete your final property walkthrough
- Have your downpayment and closing funds ready to wire
Don’t:
- Apply for new credit (loans, credit cards, etc)
- Make major purchases or withdrawals
- Deposit large sums without documentation
- Quit or change jobs
- Miss payments or default on obligations
Essentially, pretend you’re still in underwriting. Keep good records and notify your lender about anything that changes.
Also watch that your employer doesn’t deposits your income differently or under a different name. This could cause hiccups with final verification.
Let the Celebration Begin…After Closing!
When you finally get word that you’re “clear to close”, breathe a big sigh of relief. Take it as a sign you’re oh-so-close to the big day. But don’t crack open the champagne or call the moving truck just yet.
Tread carefully in the days between clear to close and your funded closing. Watch your credit, job, income, assets, and the property condition itself. With caution and patience, your celebration will come soon enough!
What Does Clear to Close Mean?
If you’ve received a “clear to close” status on your loan, congratulations! You’re close to the finish line.
“Clear to close” means an underwriter has approved your loan documents and that any conditions that were required for the loan to be approved have been met. It also means your lender is ready to confirm your closing date with the title company or attorney.
Can My Loan Still Be Denied?
While it’s rare, the short answer is yes. After your loan has been deemed “clear to close,” your lender will update your credit and check your employment status one more time. Usually, a month or two will have passed since you filled out your loan application, and the lender wants to make sure you haven’t taken out any other loans or switched jobs during that time. If you have made changes in either of these areas, it could impact your loan.
For example, if you apply for a mortgage and then open a new credit card to buy furniture or appliances for your new home, it will increase the amount of debt you are responsible for and will change your financial profile. This could cause you to no longer qualify for your new home. In addition, if you miss paying any monthly bills since applying for your loan, it could impact your credit score and may impact your ability to qualify for the program you originally applied for.
Your lender also needs to confirm your job status before closing. This is typically done by placing a call to your employer’s Human Resources Department. If you quit or lost your job since your loan approval, your loan could be denied. Even if you left your job for another job with equal pay, your loan could still be denied, or delayed, depending on the type of loan you have.
What happens when your loan is clear to close?
FAQ
What can go wrong after clear to close?
Could lose your job, seller could die, home could be flooded, hurricane, tornado, etc. I have had all those issues happen when trying to close. You aren’t in the clear until county recorded.
Can a bank deny an auto loan after closing?
What to do if you’re denied an auto loan after you buy the car. If you were approved for an auto loan the first time, you probably won’t be turned down again unless your information has changed or there was a mistake. Reach out to the lender to learn why your loan application was denied.
Can a lender cancel your loan after closing?
Sadly, yes, that can happen. In many closing documents, there is a clause that says the lender can back out of the deal if anything changes that would make the loan less risky after it has been approved or closed.
Does clear to close mean approved?
Yes, “Clear to Close” (CTC) signifies that a mortgage lender has finalized their approval of your loan application and is ready for the closing process. It means the underwriter has reviewed all necessary documentation and verified that the borrower meets all requirements for the loan.