Buying a home isn’t always a smooth process, sometimes there are a lot of hurdles that one must overcome in order to actually get to the closing table. Between getting pre-approved by a lender, finding a home and potentially selling your current home there are about a 100+ things that could go wrong. So let me tell you, when you hear those three amazing words (Clear to Close) come out of your lenders mouth, you should jump for joy! If you have heard these words that means that you have satisfied all of the lenders requirements required in order to loan you money for your purchase.
So what exactly is required to get to the finish line? Erik J. Martin, a writer for The Mortgage Reports, gathered some very valuable information from James Dodge, professor of law at Purdue University Global to help prepare you for the home buying journey.
Things needed to get a Clear to Close:
- Underwriting conditions for the borrower, such as updated bank statements
- Funding conditions, including the payment of closing costs and the down payment
- Quality control for the lender, including a final credit check and employment verification
- a copy of the signed purchase contract
- updated bank statements, pay stubs and tax returns
- info about large deposits (to ensure you aren’t taking on additional debt)
- letter or answers about anything unusual related to your finances
- gift letter (if some or all of the down payment includes a gift from a relative or friend).
- paying closing costs
- depositing the down payment into escrow
- having clear title
- paying outstanding debt obligations
- properly executing loan documents
- Conducting a final credit check
- Explaining recent credit inquiries or issues on your credit report
- Verifying that you have homeowners insurance (and possibly flood insurance) coverage
- Verifying employment status
This entire process is taking place before, during and after you have found a property to write an offer on. The actual “Clear to Close” typically comes 1-2 weeks before the estimated/proposed closing date that is on the Contract to Buy and Sell Real Estate. Most people find the required documents and process for the lender a bit intimidating and invasive. If you find yourself feeling this way, try to remember that the lender is doing just that; lending you money. Therefore they are going to do their due diligence to make sure that it can get paid back.
There are also some amazing tips on how to ease the process:
- Respond promptly
- The faster you get them what they need the faster your loan officer can provide the information to the underwriter for review.
- Other wise known as Too Much Information. Only give what is asked of you. We don’t need to be opening up any cans of worms and causing a ruckus.
- Dont make any big life changes
- You’re going to want to keep your job status, refrain from making large purchases that could affect your credit, don’t take out any new loans or file for divorce or bankruptcy (I think that those two are a given, but you’d be surprised!).
- Proof of insurance
- You’re going to want to reach out and obtain insurance on the property you wish to purchase. This is good for a few reasons: you get to find out if its insurable and at what cost, and make sure that its not in a flood zone.
- Special circumstances
- Are you getting funds gifted to you from a loved one? Check with your lender before making and financial wires, deposits or transactions to make sure how these can be accomplished the proper way.
Any specific questions or concerns? Reach out to me and I'd be happy to answer them! Krystal@westandmainhomes.com