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What Clear to Close (CTC) Means for VA Buyers

When your loan officer calls to say your loan is Clear to Close (CTC), that means the underwriter has approved all documentation necessary for the title company to schedule the closing and start drafting the Closing Disclosure.

 

Receiving word that you're "clear to close" is one of the most joyous moments of the homebuying journey. Clear to close (CTC) is a green light for lenders to order closing documents and for borrowers to schedule their loan closing. But now that your CTC, what happens next?

From the moment your loan receives approval from an underwriter, a huge weight is lifted from your shoulders, but you aren't quite finished. This guide will outline each step of the process from when you receive the "clear to close" until you pick up the keys to your new home.

Clear to Close Issued

When your loan officer calls to say your loan is clear to close (CTC), that means the underwriter has approved all documentation necessary for the title company to schedule the closing and start drafting the Closing Disclosure.

A Closing Disclosure outlines the final or near-final costs for both the borrower and seller.

But it isn't a guarantee your loan will close. Prior-to-Funding conditions have to be cleared prior to the wire transfer. We will discuss those in more detail a little later.

What does CTC mean in the mortgage process?

CTC is an acronym for "clear to close." Clear to close means the underwriter has approved all documentation necessary for borrowers to schedule the loan closing.

Once your lender issues the CTC, it's time to schedule your closing. Your closing date could be the date selected on your contract, though it may be earlier if you had a very simple underwrite. However, in some cases it may be after your scheduled closing date if you had issues in underwriting.

The main thing to note is your loan closing won't occur on the same date you receive your CTC. There is just too much that has to get done between CTC and closing for this to happen.

Once you receive your CTC, an additional player will be added to your lender's team: the closer. This specialized individual is the go-between for the title company, loan officer and underwriter. Closers ensure all final loan documents meet VA, federal and lender guidelines. The closer will also work with the underwriter to clear prior-to-funding conditions on your loan.

Adjusting insurance coverage dates

Depending on your insurance company and the original policy quote's timing, it may be necessary to contact the insurance company and move up or push back the coverage date.

With many insurance providers the loan officer can handle this, but there are a few companies that require communication directly from the borrower to update the policy. Your loan officer will let you know if this is something you need to do.

Closing Disclosure

Until the Closing Disclosure is approved, your closing costs are just estimates. These numbers are not finalized until a specific closing date is set in stone. The fluctuation occurs because the date of closing will affect how much needs to be collected for taxes, insurance and other fees.

Once the CTC is issued, your lending team will get to work on your Closing Disclosure with the title company.

Some states require the use of a closing attorney, who acts as a go-between for the title company and lender.

States that require a closing attorney include Alabama, Connecticut, Delaware, Georgia, Louisiana, Maine, Massachusetts, Mississippi, New York, North Carolina, South Carolina, Vermont and Virginia.

If you're purchasing in a state not on this list, double-check with your real estate agent or a title attorney as there are a few counties that are outliers and may require an attorney as well.

The Closing Disclosure will detail how much money you need to bring to closing or how much you will be getting back.

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Final walkthrough

After scheduling your closing, your real estate agent will likely arrange a final walkthrough of the property. The final walkthrough is outside the loan process scope, so your loan officer and lender will not be involved in this step.

The final walkthrough is a time for buyers to visit the property to ensure the following:

  • Agreed upon repairs have been completed
  • All items included in the contract are in the home
  • The home is clean of all trash, and all non-contract items have been removed

If one or more of these are not complete, then it will be up to the buyer's real estate agent to communicate and negotiate the completion of these items with the seller.

What happens at closing?

The closing generally occurs at the title company or title attorney's office. On the day of closing, you will sign all your final loan documents.

Frequently the seller and buyer sign the documents at different times, but there are some instances where both parties will sit at the closing table and sign documents together.

The Closing Disclosure will itemize all closing costs for the buyer and the seller. It's not uncommon for many VA borrowers to pay little to nothing at closing by negotiating for seller-paid closing costs. But every transaction is different.

It's important to note that title companies often have restrictions on payment methods they will accept. Many will only accept a certified check or money order and will not accept a personal check or debit/credit card. Use your loan officer as a resource to determine how best to handle the cash due at closing.

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Prior-to-Funding Conditions

After you receive the clear to close, your loan officer will notify you of any remaining prior-to-funding conditions. These are conditions outlined by the underwriter that must be met before the funds are wired to the title company.

A couple of examples of common prior-to-funding conditions include:

Alive and Well statement

If you are on active duty using power of attorney, the underwriter will need an alive and well statement. The purpose of this document is to confirm that the borrower on the loan documents is alive and well at the time of closing. There are a few different versions of this statement, depending on where you are deployed.

If you have easy access to a telephone and can speak with your loan officer on the day of closing, your loan officer can draft a statement confirming this information.

If you aren't available for phone contact on the day of closing, you will have to furnish a written statement confirming you are alive and well as of the date of closing.

Talk with your loan officer for more information about Alive and Well statements.

Re-inspection

If repairs are noted on the appraisal, the appraiser will have to conduct a re-inspection to confirm completion. You'll also have to show evidence of who paid for the repairs.

Spouses not on the loan will likely still have to sign certain documents at closing, but this can vary by state.

If your original closing date was June 30, but your closing gets pushed back to July 1, active duty and reserve personnel will have to provide an updated Leave and Earnings Statement (LES).

All prior-to-funding conditions will have to be cleared by the underwriter or closer before wiring funds to the title company.

Wire/Funding

Once all prior-to-funding conditions are met, and you've signed all closing documents, your lender will wire the funds to the title company or closing agent. This is called funding. In some states, loans fund the same day as closing (called table funding), and in others, they occur the next business day.

You should consult with your loan officer on when your funding will occur. Why does this matter?

Some title companies hold onto the keys to the home until the loan is funded. If you're in a next-day funding state, you'll want to plan your move accordingly.

What is a wire transfer?

A wire transfer is a transaction between the mortgage company and the closing agent (title company or closing attorney). The mortgage company sends the loan funds to the closing agent to complete the transaction.

Keys and Moving

Once you receive your CTC and schedule your closing, it's time to start packing and arranging your final moving plans. Whether you're moving across town or the country, it's always a good idea to wait until you receive your CTC. That way, if there's an unforeseen issue with your loan that requires a few extra days of work, you haven't already packed up and moved out.

Depending on the title company and your arrangements with the seller, you will receive the keys on the day of closing or at a later date.

Key Questions to Ask

Does my spouse need to be present at closing?

In most cases, the answer is "Yes," even if your spouse isn't on the loan. Make sure to check with your loan officer and the title company before closing. Guidelines on this vary by state.

Does my power of attorney meet the title company or attorney’s standards?

Some title companies are very particular on the power of attorney forms they will accept if you will not be physically present at closing. Check with your loan officer or the title company in advance to avoid delays.

How much money do I need to bring to closing?

Once your loan officer has approved the Closing Disclosure, you should know to the penny how much you need to bring to closing, if any. Changes to the disclosure are possible, but significant changes will result in the issuance of a new Closing Disclosure (which will also trigger a three-day waiting period).

What methods of payment are accepted?

Many closing agents will only accept cash or money order. If you will owe money at closing, confirm with the closing agent in advance to be prepared with the proper payment method.

Things to Avoid

Changes in employment

One of the closer's jobs is to verify that you're still employed where you say you are. Any changes in employment could cost you the house.

Big purchases

Your loan has been approved, which means you are good to go, right? Wrong. Until your loan has been funded, do not make any large purchases that could alter your debt to income ratio. If you do, your loan will have to go back through underwriting to determine if you still meet lending guidelines.

Credit Inquiries

You are buying a new home, and understandably you want to make sure it looks nice. Just know that now is not the time to open a new credit card to purchase furniture or home goods. If you intend to open a new credit line, wait until after your loan has been funded to even think about applying.

Talk with your loan officer if you have any questions about your closing costs, cash-to-close or anything else related to your clear to close and your impending loan closing.

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