What does clear to close mean?

Once you’ve found a home you want to buy, been approved for a mortgage and made an offer, closing on the home may come pretty quickly. A lender considers a homebuyer cleared to close once they have everything they need to establish a closing date.

Key takeaways

• Clear to close is the lender’s authorization to move forward with a closing date.
• Don’t make any changes to your employment, income or credit before closing.
• You’ll receive a Closing Disclosure, which details your loan’s finalized terms, three business days before closing.

Clear to close meaning

Clear to close means your lender has verified that you meet the requirements and conditions for a mortgage and you can proceed with scheduling a closing date. This approval comes after they have completed the various steps of the underwriting process, like reviewing your finances and completing a home appraisal and title search.

Essentially, it signifies that the lender has tentatively agreed to fund your loan and you can move forward with closing on the home purchase.

Clear to close timeline

How long it takes to get cleared to close depends on how quickly you provide all necessary documents, your lender’s promptness and any snags you might encounter in price negotiations or during the appraisal and inspection. A lender must clear you to close at least three days before the closing date.

1. Preapproval

Frequently, the first real step toward being clear to close is completing a preapproval application with your chosen lender. You’ll need to provide various types of documentation to prove your income and your assets. This may include W-2s, pay stubs and recent bank statements.

When the bank has completed its preliminary investigation into your finances and your credit history, you should receive a preapproval decision within one to three days of submitting an application. Preapproval allows you to move forward in the home search process and make better offers on homes you’re interested in.

2. The offer

According to a 2021 report by the National Association of Realtors, buyers generally spend about eight weeks searching for a home. Once you’ve found a home that checks all your boxes, you can submit a purchase offer. Your real estate agent can give valuable insight into an appropriate offer based on the market trends and comps in the area.

Typically, there’s then a short period of negotiation between you and the seller, which can take a few days. Once both parties reach an agreement on the terms of the offer (including the price, concessions and closing date), you can submit a formal mortgage application. From there, it usually takes anywhere from 30 to 60 days to close.

3. Appraisal and inspection

During this time, your lender will order a home appraisal to see what the home is worth. The appraisal can slow down the closing process, though, depending on how busy appraisers are.

“The part that takes the longest is the appraisal,” said senior mortgage planner Ashley McKenzie-Sharpe of Fairway Independent Mortgage Corp. However, this may be different in a less active real estate market.

You’ll want to schedule an appraisal as soon as your offer is accepted to ensure adequate time before closing. In some cases, you may be able to get an appraisal waiver from your lender, though these aren’t common.

It’s also a good idea to get a home inspection, though it’s generally not required. The home inspection will provide a more detailed report about the home’s condition, including any structural damage and potential safety issues. Most offers have a home inspection contingency written within the agreement, which essentially states you can back out of the deal if the home’s condition isn’t up to your standards.

4. Underwriting

Once all the other aspects of the underwriting process have been completed (verifying your personal information, the title search, etc.) and the underwriter is satisfied with the results, you should receive verified approval and be deemed clear to close. Underwriting generally takes a week or so on its own, though it can be significantly faster or slower in some cases.

How to get cleared to close

Lenders need to see stability in your employment, income and spending habits before you can be cleared to close.

“Once you are preapproved, keep everything the same. Do not change jobs, make purchases on credit or deposit large amounts of cash into your account,” says McKenzie-Sharpe. Any major changes in your financial situation, especially during a short span of time, can be a red flag to lenders.

McKenzie-Sharpe says the two most common reasons borrowers may be denied are changes in employment and changes in credit (from purchasing a new car, for instance). Many lenders will pull your credit report again before closing to ensure there have been no major purchases or changes during the underwriting process.

Can you be denied after clear to close?

You can be denied a mortgage even after you’re cleared to close, although this is rare. Between getting cleared to close and receiving the Closing Disclosure, your lender will most likely verify your credit and employment again. If there’s a sudden change in your income, finances or credit, the lender may reject the loan.

Clear to close 3-day rule

As part of the Consumer Financial Protection Bureau’s “Know Before You Owe” mortgage rule, lenders are required to provide a Closing Disclosure three business days before the closing date so borrowers have time to read over this important legal document before signing.

This window also gives you time to ask your real estate attorney about the terms. It’s very important to carefully read the details within the Closing Disclosure — you could find mistakes that need to be corrected before closing.

Bottom line

If your lender gives you a clear-to-close decision, you have the green light to proceed with scheduling a closing date. As long as there aren’t any drastic changes to your financial situation before you close, your lender should hold up their end of the deal.

You’ll receive a Closing Disclosure three business days before closing, so make sure you read over the document carefully, paying close attention to the agreed-upon loan terms. If there are any mistakes, alert your lender immediately so those issues can be resolved in time for closing day.