Clear To Close Timeline Explained (2024)

“You’re clear to close!” Those are the magic words every mortgage applicant longs to hear after weeks of waiting, providing documents, making phone calls and answering emails.

But what happens after you get that good news? How long until you get the keys to your new home, pay off your old mortgage or get that bank deposit from your cash-out refinance?

What Does “Clear to Close” Mean?

“Clear to close” or “cleared to close” means the mortgage underwriter and escrow agent assigned to your loan have reviewed your file and found it satisfactory. You’re now just a few days away from your lender funding the loan and closing—or settling—your transaction.

Here are the items requiring approval before clearing your loan to close:

• The property’s appraised value is high enough to justify the loan
• Your financial accounts don’t show unusual deposits that indicate you may be taking on additional debt
• Your debt-to-income (DTI) ratio is below the limit for your loan type
• Your credit reports don’t show any new accounts or delinquent payments
• You’ve secured homeowners insurance for the property
• A title search has found that the property’s title is clear; if not, resolve any title defects and have title insurance in place
• The termite inspection is satisfactory, or required remediation is complete
• Your employer has verified you still have your job

What Happens After You’re Clear to Close?

Several things will happen over the next few days once you’re cleared to close on the loan.

1. Receive and Review Your Initial Closing Disclosure

Once your loan officer tells you that you’re clear to close, you can expect them to prepare your initial closing disclosure and send it to you. Your initial closing disclosure shows the key details of the transaction, including your mortgage rate and term, loan type, closing costs and the amount of cash needed to close.

By law, you must receive your initial closing disclosure three business days before signing your loan paperwork. A business day is any day except Sundays and national holidays.

Review your initial closing disclosure immediately, and compare it with your loan estimate to ensure you’re getting the deal your lender promised.

If you have any questions or concerns, take them to your loan officer right away so they can explain or correct your initial closing disclosure. If they need to issue a new one, the three-day clock will restart.

2. Review Wire Transfer Instructions

While waiting to close, ask your lender for instructions on how to wire the funds required for the transaction. These funds are your “cash to close,” which may include a down payment and closing costs. Your financial institution can help initiate the wire transfer.

Wire transfer fraud in real estate closings is a serious problem, but the Consumer Financial Protection Bureau (CFPB) offers tips on avoiding becoming a victim.

3. Do a Final Walkthrough

If you’re buying a home, take advantage of the three-day waiting period to do a final property walkthrough. If you’re buying remotely, ask your agent to do a final walkthrough with you by video.

Make sure the seller has left the property in the condition you agreed upon. They should also leave behind anything your contract says you get, like the washing machine or refrigerator. If the seller was supposed to fix anything, make sure the repairs were completed and don’t look shoddy.

4. Sign Your Loan Documents

Your lender will prepare the loan documents and send them to your escrow company (also called a title company or settlement company). This company will prepare the other closing documents and transmit the entire package to you for signing.

Signing can take place at the office of your title company, escrow company or real estate attorney. It can even happen in your home or a mutually convenient public place. (Signing laws and customs may vary by state.)

You’ll need a notary signing agent present to witness your signature and verify your identity. If your lender offers it, and your state allows it, you may be able to do a fully digital closing with remote online notarization (RON). California, Georgia and Connecticut don’t allow this type of notarization as of June 2023. Mississippi and Massachusetts are temporarily allowing RONs, while South Carolina doesn’t have laws in place to address them.

These documents will include a final closing disclosure that should be identical to the initial closing disclosure you reviewed. The possible exception is that items, like prorated property taxes and insurance premiums, may have changed if your closing date was moved.

Once you’ve signed your loan documents, they’ll go back to your closing agent (the title or escrow officer handling your transaction). Your closing agent will ensure the other parties in the transaction, like your lender and the seller (if you’re buying a home), receive the signed documents they need.

5. Initiate Funding

You’ll wire any required funds, and after reviewing your signed loan documents, your lender will disburse your loan proceeds to the escrow company.

The escrow company will then disburse those funds to the appropriate parties. Those parties might include your existing mortgage lender (if you’re refinancing), the home seller and seller’s mortgage lender (if you’re buying), your homeowners insurance company and local property tax agency.

Note: If you’re refinancing, funding can’t happen until the three-day right of rescission period is up.

6. File Legal Documents

Your closing agent will file the signed deed of trust or mortgage note with your county recorder, documenting the new mortgage against the property. For a sale, they’ll also document the property deed of sale.

Any lenders who get repaid from the transaction must file a mortgage lien release or satisfaction of mortgage document with the county recorder. The title company may do this on the lender’s behalf.

7. Get Your Keys

If you’re buying a home, you’ll officially be able to move in once the property deeds are recorded with the county.

8. Settle the Loan

Finally, a settlement agent will settle your loan. You’ll get a refund if you overpaid on any estimated prepaid items at closing. You’ll also receive copies of all the final documents associated with your loan.

Can You Get Denied After You’re Clear to Close?

Yes, you could get denied after you’ve been cleared to close. In the days leading up to your closing, do your best to make sure nothing happens that makes you look like a riskier borrower. Your safest bet is to avoid making any financial moves during this period, such as:

• Apply for any new credit cards or loans
• Charge a large purchase to your credit card
• Quit your job
• Change jobs
• Get married
• Get divorced
• Move money from one financial institution to another
• Deposit a large sum of money into your bank accounts
• Withdraw a large sum of money
• Pay off any debts

How Long From “Clear to Close” to Closing?

The timeline from being cleared to close until your loan is closed and funded can be less than a week, but it depends on several factors.

Closing Disclosure Accuracy

If all the numbers and loan terms on your initial closing disclosure are accurate, you’ll get to the signing table faster than if your initial closing disclosure needs to be revised.

Remember, you’ll have to wait three days after receiving your initial closing disclosure (or, in some cases, a corrected version) before you can sign your loan documents.

State Where the Property Is Located

States have different laws about signing real estate documents. Most states allow you to sign loan documents and have your loan funded and recorded in a single day. A few states require these steps to take place over three days.

Third-Party Delays

If your closing agent gets sick, your notary gets a flat tire, your lender’s electricity goes out for a day or there’s high demand for closing services, you might experience delays when you’re just behind the finish line.

First-Party Delays

You could also come down with a nasty virus or experience a family or work emergency that forces you to postpone your closing. It might not be a good idea to push yourself to sign important paperwork and initiate a wire transfer when you’re sick or in crisis mode.