While the process of home buying can be complicated and stressful, when you reach the closing phase you are in the home stretch.
There are several mortgage application processes you’ll have to undergo to reach the clearance stage.
Here’s a rundown of everything you need to know about getting cleared to close.
What Does Clear to Close Mean?
What does a clear to close mean in real estate? In simple terms, getting cleared to close means that your mortgage loan application has been approved by a mortgage underwriter. While getting approved isn’t the final step to securing your mortgage loan, you’re only a few steps away.
When you get cleared to close, it means the documents you submitted during your application process have been reviewed and you’ve been deemed worthy of a mortgage.
Can You be Denied a Loan After Getting Cleared?
It’s possible. Some factors may hinder your progress even after clearance. If you lose your job or if your credit card score drops, your clearance to close may be denied.
What Is the Timeline for House Closing?
The clear to close timeline for houses closing in the United States is 45 days on average. The processes leading to the underwriter sending you a notice of house closing to finally becoming a legal homeowner include:
Mortgage application is the first stage of your journey. The application typically takes a day to complete and can be done as part of your mortgage pre-approval process.
Some of the data needed for this application range from your name, social security number, address, proof of income, and the loan amount you are applying for.
This phase of the application is done by the lender who gives out the terms of the loan. The lender also maps out the monthly payment structure and other closing costs. This process takes a few days to a week to carry out.
This is the stage where your lender reviews your income and assets. This stage takes a week to complete. However, if the documents that your lender needs are readily available, the process can be faster.
At this stage, your lender orders a third-party appraisal to determine the value of the property you intend to buy. Appraisal also helps to record the accurate value and thus budget for the property given the value.
– Conditional Approval
As your application progresses, you may get conditional approval. This loan approval means that your lender is satisfied with the documents you’ve submitted so far. However, your loan officer may still want you to meet certain conditions that they set.
Some of the conditions that your lender may require you to meet can be submitting your bank statement, proof of income, a letter of notice for a big withdrawal, and so on.
– Clearance to Close
At this stage, you’re approaching the final steps of closing your loan process. The underwriter approves your mortgage and grants you permission to close the deal.
Once you get your clear to close mortgage, your application has been cleared for closure. However, you’ll pass through a three day waiting period before you can sign.
– Closing and Funding
Once you sign the necessary papers, your mortgage process is complete and you’ll be a homeowner.
Tips to Hastening Your Closing Mortgage
No one fancies a prolonged delay especially on mortgage issues due to the hassles and complexity of it. As such, you may want to consider taking these steps to help hasten your mortgage process and close it as soon as possible.
– Get the Necessary Documents Ready
Dedicate a good amount of your time to gathering essential documents that’ll be needed for processing your mortgage. Keep them on standby and be ready to present them to your mortgage lender for verification.
Ensure you assemble all your personal and financial documents. Also, get a digital copy of the documents and keep them ready in case you’re required to send some through an email.
Some of the documents to gather for processing include:
- Pay stubs
- Tax returns and financial history of the last two years
- Bank statements
- W-2s from both your current and previous employers
- Profit and loss statements if you’re a business owner or self-employed
- Divorce certificate if there’s any
- Gift certificate if a family member is providing you the funds for the down payment
– Review Your Credit Reports
To avoid unseen errors that may be lurking in your credit report, ensure you take the time to review it. If there are any, get them corrected early.
Addressing the issue and putting your credit report in order can hasten your home buying process towards concluding your mortgage.
– Avoid Making Significant Financial Changes
While your mortgage loan request is still under review and pending approval, avoid making any sudden financial moves. Making such a move can affect your credit score as well as your debt-to-income ratio.
Reasons Why House Closing May Delay
While some of the causes for the delay in the closing may be beyond your control, it is important you know those that you can control and act to prevent them.
One of the common reasons for the delay is the appraisal process. Appraisals are carried out by an independent third party to find out the true value of the house you’re trying to buy.
An appraisal can cause the mortgage process to be suspended if there are discrepancies in the value placed on the house by the seller and the one highlighted by the appraisal. The time that it takes to resolve the difference in the worth of the property can delay the closing timeline.
Other issues from the buyer’s and seller’s end can also cause delays. They include:
- Issues with buyer’s credit report
- Incomplete loan application
- Owing of debt
- Failure to deposit the down payment in time for the money to be traced
- The house seller’s failure to complete the repairs in the house was discovered during the inspection
- Liens that may be placed on the property
- Loan officers who aren’t experienced in handling house closures.
Why You Need to Close Your Mortgage as Soon as Possible
To avoid paying for an extension to your mortgage rate lock, consider speeding up the closing process.
A mortgage rate lock is a feature in real estate that keeps your interest rate from rising while you run through the process of closing on your loan.
If you don’t hurry the closing process, the mortgage rate lock may expire and you may need to renew it or face the risk of having your interest rate go up. This means paying more interest.
Again, you’ll want to close your deal as soon as possible to free yourself from the hassles, paperwork, and other real estate complexities.
Closing Day and What to Expect
While the process leading up to the closing day can take between 30 to 45 days, the closing itself takes only a few hours to complete.
You’ll be given a file of legal documents to sign on the scheduled closing date in order to conclude and make every agreement bonding.
Also, this is the day when you’ll be required to make a down payment and cover other closing costs. The closing costs aren’t exclusively for you. The house seller is also required to pay a small part of the costs too. Such costs include taxes, homeowners association fees, and other assessments.
Closing costs typically range from three to six percent of the total price of your home.
Documents You May Be Requested to Sign
Several loan documents are made available for you to sign. The documents that you’ll be required to sign include:
– The Promissory Note
This is a document that binds you, the loan benefactor, to pay back your loan granted you by your lender. The promissory note outlines the agreement terms and the information about the loan while containing terms like:
- The total amount borrowed
- Interest rate
- Monthly payment amount
- Number of required payments
- The frequency of the payment
- Available collateral
- Date and location the note was issued
– Mortgage Note
The mortgage note is quite similar to the promissory note. This document reflects all the terms of the agreement between you, the loan benefactor, and the lender. The note serves as a description of the mortgage. It highlights methods you can use to repay your loan and uses your home as collateral.
– The Escrow Disclosure
This document provides details about your escrow account and how much you’ll be paying every month into the escrow account.
– Deed of Trust
This highlights the agreement between the seller and the buyer. It mandates the buyer to repay the mortgage loan by trusting the legal title of the property to the loan lender. The homeowner gets back the legal title when they pay off the mortgage.
The deed of trust document also allows the lender to sell the property if the loan benefactor stops making payments.
The mortgage journey can be rigorous and challenging, so getting the all-clear to close will need expert hands. You might want to consider hiring the services of professional real estate agents who will guide you through the process of acquiring your mortgage loan.
The team at Homes by Ardor is dedicated to ensuring your search for a house is made a lot easier and at the best price. Homes by Ardor have access to a wide variety of properties across the country. They can also guide you through the rigorous process of acquiring a mortgage loan. So, reach out to them today!