Understanding Clear to Close and the Final Stages of VA Homebuying

Receiving word that you're "clear to close" is an exciting moment in the homebuying journey. Getting approval for your loan from an underwriter can feel like a huge weight off your shoulders, but don't celebrate just yet.

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.

What happens after clear to close?

1. Receive and Review Closing Disclosure

After receiving a clear to close (CTC), the next step is to review your closing disclosure. Your lender should prepare this document and send it to you. A closing disclosure outlines the final or near-final costs for both the borrower and seller, including the mortgage rate and term, loan type and closing costs.

You must obtain your initial closing disclosure three business days before signing your loan documents. Once you receive the disclosure, compare it with your original loan estimate to verify all terms.

Should you encounter any uncertainties or discrepancies, promptly consult your loan officer. They can clarify or rectify your closing disclosure. If a revised one is necessary, the three-day countdown will restart.

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.

It’s important to note that some states require the use of a closing attorney, who acts as a go-between for the title company and lender. These states 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.

A closing disclosure isn't a guarantee your loan will close. Prior-to-funding conditions have to be cleared prior to the wire transfer.

2. Review Prior-to-Funding Conditions

Your loan officer should notify you of any remaining prior-to-funding conditions. The underwriter outlines these conditions, which 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. There are certain stipulations when it comes to written statements being approved as an alive and well statement, so make sure you talk with your loan officer if you need to go this route.

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.

3. 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.

4. Sign Closing Documents

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.

5. Provide Funding and File Legal Documents

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.

6. Get Your Keys and Move

Once you’ve completed funding, it's time to arrange 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 should receive the keys on the day of closing or at a later date.

Can I get denied after receiving a clear to close?

Yes, even after receiving a 'clear to close' status, there's a possibility of being denied the loan. In the days approaching your closing, try to maintain a stable financial profile and avoid activities that could portray you as a high-risk borrower.

During this window, it's advisable to avoid:

• Applying for new credit cards or loans
• Making substantial charges on your existing credit card
• Quitting or changing your job
• Entering into or ending a marriage
• Transferring funds between different banks or institutions
• Adding a significant amount to your bank accounts
• Withdrawing large amounts of money
• Paying off other debts

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