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When you are “cleared to close” on a mortgage refinance, the lender has reviewed your required documentation, completed underwriting, and approved the new loan. This means you have satisfied the lender’s conditions and are approaching the final stage of replacing your existing mortgage.
Although “cleared to close” is an important milestone, you should continue to avoid major financial changes until the refinance has closed and funded.
What Does “Cleared to Close” Mean?
Being cleared to close generally means that the conditions established during underwriting have been satisfied. The lender has typically completed its review of the following:
- Income and Employment: Your income and employment have been verified using documents such as pay stubs, tax returns, bank statements, or employer verification.
- Credit: Your credit history has been reviewed, and any questions or discrepancies have been resolved.
- Property Appraisal: If an appraisal was required, the lender has confirmed that the property’s value supports the refinance.
- Assets and Insurance: The lender has verified any required assets, reserves, and homeowners insurance coverage.
- Additional Documentation: All requested explanations and supporting documents have been reviewed and approved.
The lender may still perform final checks before funding, such as confirming your employment, credit, insurance, or available funds. Avoid applying for new credit, changing jobs, moving money between accounts without documentation, or making large purchases before the transaction is complete.
What Happens After You Are Cleared to Close?
Your Closing Is Scheduled
The lender or closing agent will coordinate a date for you to sign the final refinance documents. Depending on the transaction and local requirements, signing may take place at a title company, attorney’s office, settlement office, or another approved location. Remote or mobile signing may also be available.
You Receive the Closing Disclosure
For most mortgage refinances, you should receive a Closing Disclosure at least three business days before signing. This document summarizes the final loan amount, interest rate, monthly payment, closing costs, and any cash you must bring to closing or may receive from the transaction.
Review the disclosure carefully and compare it with your most recent Loan Estimate. Contact your loan officer immediately if you notice unexpected fees or changes.
You Arrange Any Required Funds
If money is required from you at closing, the closing agent will provide payment instructions. Confirm wire instructions directly with a trusted contact before transferring funds because wire fraud is a serious risk. Do not rely solely on instructions received by email.
You Sign the Refinance Documents
At closing, you will sign documents such as the promissory note, mortgage or deed of trust, Closing Disclosure, and other required forms. Bring a valid government-issued photo ID and follow any additional instructions from the closing agent.
A Rescission Period May Apply
Certain refinances secured by a borrower’s principal residence include a three-business-day right of rescission. If this applies, the lender generally cannot disburse the loan proceeds until that period has expired.
Not every refinance includes a right of rescission. For example, the rules may differ for investment properties, second homes, or certain refinances involving the same lender. Your lender or closing professional can confirm whether a rescission period applies to your transaction.
The New Loan Is Funded
After all closing requirements and any applicable rescission period have been completed, the lender funds the new mortgage. The existing mortgage is paid off, applicable fees are paid, and any eligible cash-out proceeds are disbursed.
Continue making payments on your existing mortgage until you receive confirmation that it has been paid off. You should also confirm when and how payments on the new loan must begin.
How to Prepare for Your Refinance Closing
To help the closing proceed smoothly:
- Review your Closing Disclosure and confirm the loan terms, interest rate, payment, and fees.
- Ask questions about any amount you must bring to closing or will receive from the refinance.
- Confirm whether a right of rescission applies.
- Bring an acceptable government-issued photo ID.
- Verify wire instructions directly with the closing agent before sending money.
- Keep your finances stable and avoid new debt or major purchases.
- Continue paying your current mortgage until its payoff has been confirmed.
Conclusion
Being cleared to close on a refinance means that underwriting is substantially complete and the lender is ready to move toward signing and funding. Once you sign the final documents, complete any applicable rescission period, and satisfy the remaining closing requirements, the new mortgage can fund and replace your existing loan.
