What does Cleared to Close mean?
Short Answer:
"Cleared to Close" in the mortgage process means that the lender has reviewed and approved all the documents and conditions required for the loan. It indicates that the underwriting process is complete, and the borrower is now ready to proceed to the closing stage, where the final paperwork is signed, and the loan is funded. Essentially, it's the green light for the borrower to finalize the home purchase.
Longer Answer:
Navigating the mortgage process can be complex, with numerous steps and terminology that may be unfamiliar to first-time homebuyers. One such term is "Cleared to Close." Understanding this can help you feel more confident as you approach the final stages of buying your home.
What Does "Cleared to Close" Mean?
"Cleared to Close" is a significant milestone in the mortgage process. It signifies that the lender has completed the underwriting process and has approved all the documents and conditions required for the loan. Essentially, it means that the lender is satisfied with your financial situation and the details of the property you are purchasing, and you are now ready to move forward to the closing stage.
Steps Leading to "Cleared to Close":
Application and Pre-Approval:
- The process begins with submitting a mortgage application and obtaining pre-approval. This involves providing financial documents and information to the lender.
What happens in mortgage processing?
- The lender/loan processor reviews your application, verifies your financial information, and orders an appraisal of the property.
What happens in mortgage underwriting?
- An underwriter reviews all the documents (paystubs, W2s, credit reports, bank statements) to assess your financial situation, credit history, and the property's value via the appraisal to ensure you meet the lender's criteria. Many times lenders will conditional approve a mortgage without having the appraisal or insurance returned.
When are You Conditional Approval?
- You may receive conditional approval, where the lender requires additional documentation or information before final approval. Once these documents or answers are collected, the loan processor will send them back to the underwriter for review. The underwriter might come back with additional questions or requests for documentation. In some rare instances, an underwriter might suspend a loan because it does not meet the criteria for that particular mortgage request.
When Are You Cleared to Close?
- Once all conditions are met, and the underwriter is satisfied, you receive the "Cleared to Close" status, indicating you can proceed to the closing.
What Happens Next after Clear to Close is Granted?
After being "Cleared to Close," the closing process begins. This involves:
- Scheduling the Closing:
- A closing date is set, and you will meet with the closing agent, real estate agent, and possibly your attorney.
- Reviewing Closing Disclosure:
- You will receive a Closing Disclosure document at least three days before closing, detailing the final loan terms and costs.
- Signing Final Documents:
- At the closing, you will sign all necessary documents, including the mortgage note and deed of trust.
- Funding and Ownership Transfer:
- Once everything is signed, the lender funds the mortgage, and you become the owner of the property.
Conclusion:
Being "Cleared to Close" is an exciting step in the home-buying journey, indicating that you are nearing the finish line. It reflects the lender's confidence in your ability to manage the mortgage and the property's suitability as collateral. At the Cleared to Close status, you are very close to being a homeowner.
If you have other questions about the mortgage process, please reach out at teamjd@mainstreethl.com
These blogs are for informational purposes only. Make sure you understand the features associated with the loan program you choose, and that it meets your unique financial needs. Subject to Debt-to-Income and Underwriting requirements. This is not a credit decision or a commitment to lend. Eligibility is subject to the completion of an application and verification of home ownership, occupancy, title, income, employment, credit, home value, collateral, and underwriting requirements. Not all programs are available in all areas. Offers may vary and are subject to change at any time without notice. Should you have any questions about the information provided, please contact me.
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