When you are “cleared to close” on your mortgage, the lender has reviewed all required documentation, completed all necessary underwriting, and fully approved your mortgage application. This final approval means you have met all conditions and requirements, and the lender is ready to finalize the loan process. Here’s what being “cleared to close” entails and what you should expect next.
What Does “Cleared to Close” Mean?
Being “cleared to close” indicates that all the conditions set forth during the conditional approval stage have been satisfied. This includes:
Income Verification: Your income has been thoroughly verified through pay stubs, tax returns, or employment verification.
Credit Checks: All credit report discrepancies have been clarified and approved.
Appraisals: A satisfactory appraisal report has confirmed the value of the property.
Documentation: All requested documentation has been reviewed and approved by the lender.
Key Implications of Being “Cleared to Close”
- Final Approval: All conditions outlined in the conditional approval have been satisfied. This includes income verification, credit checks, appraisals, and other documentation the lender requested.
- Closing Date Scheduled: You can now set a closing date. This is when you will sign the final loan documents, pay any remaining closing costs, and officially take ownership of the property.
- Preparation for Closing: Your closing agent or attorney will prepare the closing documents, including the Closing Disclosure, which outlines the final loan terms and costs. You should receive this document at least three business days before closing.
- Funds Transfer: On the closing date, the lender will prepare to transfer the mortgage funds to the appropriate parties (seller, escrow, etc.).
- Signing Documents: On the closing date, you will meet with the closing agent or attorney to sign all necessary documents, including the mortgage note and deed of trust.
- Ownership Transfer: Once all documents are signed and funds are disbursed, the ownership of the property will be officially transferred to you, and you will receive the keys to your new home.
Preparing for the Closing Date
As you approach the closing date, here are a few steps to ensure a smooth process:
Review the Closing Disclosure: Carefully review the Closing Disclosure you receive at least three business days before closing. Ensure that all loan terms, interest rates, and closing costs match what you agreed upon.
Final Walk-Through: Conduct a final walk-through of the property to ensure it is in the agreed-upon condition.
Arrange Funds: Ensure you have the necessary funds for closing costs, including down payment, attorney fees, and other expenses.
Bring Identification: Bring a valid government-issued ID to the closing for identity verification.
Conclusion
Being “cleared to close” is a significant milestone in the mortgage process. It indicates that you are on the final step towards homeownership. All conditions have been met, and the lender is ready to finalize your loan.
