Buying a home is an exciting affair. Aside from receiving your house keys, one of the most thrilling things is finding out that your mortgage has been given the all-clear to close. ” Based on the name, you may think that means everything is complete and nothing else is needed.
Unfortunately, that’s not 100% accurate. There’s still plenty that needs to happen before you reach the closing table.
Congratulations! Your mortgage journey has officially reached the exciting “clear to close” stage! But hold on, there’s still a bit of a rollercoaster ride ahead before you formally grab those keys! Even though your lender has approved your loan and you’ve fulfilled all requirements, there’s a slim possibility things could still go wrong at the last minute. This is known as the “clear to close” status.
What Does “Clear to Close” Mean?
Consider “clear to close” as the approval to move forward with your mortgage closing. It shows that your lender has carefully examined your file, examined your assets and income, and determined that you are eligible for the loan you have selected. They’ve basically given you the go-ahead to proceed with the last stages of the closing procedure.
So Can My Loan Still Be Denied After Clear to Close?
The short answer is yes although it’s a rare occurrence. Even with a “clear to close” status, your lender will conduct one final check on your credit and employment status before the closing date. This is just a precautionary measure to ensure nothing has changed significantly since your initial application.
What Could Cause My Loan to Be Denied After Clear to Close?
There are a few potential scenarios that could lead to a loan denial after receiving a “clear to close” status:
- Significant Changes in Your Financial Situation: If you take on new debt, such as opening a new credit card or taking out a loan, your debt-to-income ratio might exceed the acceptable limit, jeopardizing your loan approval. Similarly, losing your job or experiencing a substantial income reduction could also raise red flags for your lender.
- Discrepancies in Your Credit Report: During the final credit check, if your lender discovers any discrepancies or errors in your credit report that weren’t present during the initial review, it could impact your loan eligibility.
- Unforeseen Circumstances: In rare cases, unforeseen circumstances, such as natural disasters or economic downturns, could affect your loan approval.
What Can I Do to Prevent My Loan from Being Denied?
While the final credit and employment checks are out of your control, there are steps you can take to minimize the risk of denial:
- Maintain Financial Stability: Avoid taking on new debt or making significant changes to your employment status.
- Monitor Your Credit Report: Regularly review your credit report for any errors or discrepancies and address them promptly.
- Communicate with Your Lender: Keep your lender informed of any changes in your financial situation or employment status.
What Happens If My Loan Is Denied After Clear to Close?
If your loan is denied after receiving a “clear to close” status, don’t panic. Contact your lender immediately to understand the reason behind the denial and discuss your options. They might be able to offer solutions or suggest alternative loan programs that you might qualify for.
The Bottom Line:
While the “clear to close” status is a positive step towards closing on your mortgage, it’s not a guarantee. By understanding the potential pitfalls and taking preventive measures, you can significantly increase your chances of a smooth closing process. Remember, open communication with your lender is key throughout the entire mortgage journey.
What Does Clear to Close Mean?
If you’ve received a “clear to close” status on your loan, congratulations! You’re close to the finish line.
“Clear to close” indicates that your loan documentation have been approved by an underwriter and that all prerequisites have been satisfied. It also means your lender is ready to confirm your closing date with the title company or attorney.
Can My Loan Still Be Denied?
While it’s rare, the short answer is yes. Once your loan has been approved for closure, your lender will update your credit report and verify that you are still employed. The lender usually wants to make sure you haven’t taken out any other loans or changed jobs during the month or two that have passed since you submitted your loan application. If you have made changes in either of these areas, it could impact your loan.
For instance, applying for a mortgage and then opening a new credit card to purchase appliances or furniture for your new house will alter your financial profile and increase the amount of debt you are accountable for. This could cause you to no longer qualify for your new home. Furthermore, failing to pay any bills on time since applying for the loan may have an adverse effect on your credit score and your eligibility for the program for which you first applied.
Your lender also needs to confirm your job status before closing. This is typically done by placing a call to your employer’s Human Resources Department. If you quit or lost your job since your loan approval, your loan could be denied. Depending on the type of loan you have, you may still have your application denied or have it delayed even if you quit your job to take a position that pays the same.
“Can a loan be denied AFTER closing day?”
FAQ
Can a bank deny your loan after closing?
Do lenders pull credit after clear to close?
Can a mortgage be denied after clear to close?
Can a lender cancel a loan after closing?
Can a loan be denied after clear to close?
Yes, it’s possible for a loan to be denied after clear to close if your credit score drops or you lose your job. It’s best to think of clear to close as approval that is contingent on your credit and employment, which the bank will check once more after clear to close.
What happens after a loan officer tells you to close?
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.
What is a clear to close mortgage?
A “clear to close” buyer is in a good position. That’s because the mortgage underwriter has reviewed and approved all documentation required to fund the loan. The lender can then send a clear to close letter. Also, it means you can set the closing date. All that remains is the actual closing process. Related: How to chose the right closing date
Does clear to close mean a loan is approved?
Yes, clear to close means that your loan is approved. Unlike a mortgage pre-approval, the underwriter would have assessed the property you plan on buying. The lender likely ordered an appraisal to determine its value.