Leading To a Clear-To-Close For a Mortgage

This guide covers the mortgage closing process leading to a clear-to-close. The pre-approval stage of the mortgage process is the most important part of the overall mortgage process. A mortgage closing can get delayed for many reasons. Not providing complete docs to the mortgage underwriter is probably the biggest reason mortgage closings are delayed.

The number one reason for mortgage loans to have stress or delays in getting a clear-to-close is because the loan officer did not properly qualify the borrower.

A loan officer should take the time to qualify the borrower and ensure the pre-approval letter is solid. In this article, we will discuss and cover the mortgage closing process and the steps leading to a CTC. The mortgage process is much shorter and easier today than a few years ago. Every lender has their mortgage process.

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The Mortgage Closing Loan Process

Experienced mortgage processors will not submit the application package to underwriting if it lacks pertinent information. All documents should be complete. Examples of documents that needed to be scrubbed and prepped are the following:

bank statements
recent paycheck stubs
tax returns
copies of bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale documents
copies of divorce decrees
copies of alimony or child support documents
letters of explanations

Submitting copies of the above means complete copies, not partial paperwork. For example, lenders want to see all pages of bank statements, including blank pages, not just the page where the balance is stated. Most lenders have the same tasks they need to accomplish to lead every file to mortgage closing. The mortgage process timeline depends on how complete the application package is when it is submitted to underwriting.

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Mortgage Processing Leading To Mortgage Closing

Experienced processors should also review the 60 days of bank statements and see if the mortgage loan applicant has no overdrafts. If the underwriter catches a bank overdraft in the prior 60 days of bank statements, it can be a loan denial.

On bank overdrafts, the mortgage process either needs to wait until that overdraft has a 60-day seasoning or that bank account having the overdraft needs to be pulled out and not used.

There are creative ways of dealing with bank statements with overdrafts. It needs to be addressed before being submitted to underwriting. This is because once an underwriter sees something, it is too late. The ultimate goal is to get a clear to close and get to the mortgage closing. The more complete the mortgage application is, the sooner we can get to the mortgage closing and fund the loan.

How Long Does From Loan Application To Mortgage Closing

I have closed mortgage loans in 12 days. However, most mortgage closings take at least 30 days. It can go beyond the 30-day mark if the borrower is slow in providing conditions and documents requested by underwriters. Statistics from Ellie Mae states that the average mortgage lender in the United States takes 40 days to close a home loan.

Mortgage Closing

Every lender works at different speeds, from when the mortgage loan application is submitted to the time of the closing. It is extremely rare for me to have a mortgage closing go beyond 30 days from the time I get the signed mortgage loan application unless they request a delayed mortgage closing due to moving arrangements or the home being a new construction home.

Most banks average 45 days or longer due to the turn times of mortgage underwriters reviewing re-submitted conditions.

For example, a full mortgage loan application gets submitted to underwriting, and the applicant gets conditional approval. Conditional approval is a mortgage approval if and only if the mortgage loan underwriter’s requested conditions can be provided. Say there is a list of 20 conditions. An experienced, seasoned processor’s mission is to have as few and possibly no conditions as possible.

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Conditions on Conditional Loan Approval

There are mortgage conditions due to not submitting all the documents the mortgage underwriter can need simultaneously. The mortgage originator and processor must ensure the application is processed and all possible documents or letters of explanation are provided to eliminate as few conditions as possible.

Almost all mortgage approvals come back with conditions the first time around. Even if the processor were to submit a complete file, the mortgage approval would return as a conditional loan approval.

This is because the appraisal, title, and insurance are conditions that the processor could not have when the loan application is submitted to underwriting. When the underwriter issues a conditional approval and says there are 20 conditions, the processor will wait until all of those 20 conditions are provided by the borrower or others and submit it all at once.

Submitting Mortgage Conditions For CTC

It takes 48 hours and 72 hours for an underwriter to review conditions. The underwriter will either get a clear to close or kick the file back to the processor, stating that he or she is still missing conditions.

If the underwriter kicks the file back, stating that all conditions are not met, then the processor needs to gather the additional conditions and documents that are still missing and need to be re-submitted.

This again takes another 48 to 72 hours, which is why a mortgage closing can get delayed. It is not always the processor’s fault why the first go-around of conditions is not cleared. Many times, mortgage underwriters will add more conditions that were not listed on the first mortgage conditions list. Mortgage closing delays happen; a mortgage closing extension is often required.

Why Do Mortgage Closings Get Delayed?

Appraisals are another reason for a mortgage closing delay. If the appraisal comes back at a lower value or the appraiser requests that certain items be fixed due to hazard or not meeting HUD’s or Fannie Mae’s guidelines, then extra time is needed. Repairs can take a week or more, and appraisal rebuttals can, too.

A home buyer may get a home inspection done, and certain items might need to be corrected for the real estate purchase contract to be in full force.

This, again, may take a week or weeks to get corrected. The title is another issue. The title search performed by the title insurance company may take longer than normal, or there may be a cloud on the title, and it may take time to get it corrected. This, again, may cause a delay in mortgage closing. Insurance is another barrier that can affect mortgage closing delays. The insurance provider may need time or request that certain items, such as an alarm system, be corrected or added. This, again, can cause a delay in closing.

The Start Of The Mortgage Process

The clear-to-close is the ultimate step of the mortgage process. The CTC is the goal line. The CTC is when the mortgage underwriter signs off on the loan. The CTC is when the lender is ready to prepare the closing docs and wire the money to the title company.

The final step of the mortgage process before the home closing is clear-to-close. The clear-to-close is the ultimate goal for all parties involved, from the homebuyers, sellers, loan officers, processors, real estate agents, title companies, and other third-party professionals.

There are certain steps leading to clear-to-close. The mortgage process starts with the pre-approval process. The borrower gets qualified by a loan officer. The loan officers make sure borrowers meet the minimum credit score requirements. Furthermore, the loan officer must ensure the borrowers meet the debt-to-income ratio requirements of the particular mortgage loan program.

First Stage Of The Home Loan Process Leading To A Clear-To-Close

The steps leading to closing in the mortgage process are qualifying and getting the borrower pre-approved. Once qualified, the borrower gets a pre-approval letter from the loan originator. With a pre-approval letter, the homebuyer can go shopping for a home. Once the home buyer decides on a particular home that he or she wants to purchase, they enter into a real estate purchase contract

Once the buyers and sellers sign the real estate purchase contract, the contract is then submitted to the loan officer. This is when the mortgage process begins.

The loan officer will gather all necessary docs, such as two years’ tax returns, two years’ W2s, most recent paycheck stubs, two months’ bank statements, asset accounts such as 401k and investment accounts, and pertinent documents.

Getting The Mortgage Application Prepared For Underwriting Approval

Once the documents are collected, the loan officer will submit the package to the processing department. A mortgage processor will be assigned to the file. The mortgage processor will make sure that there are no missing items.

If applicable, borrowers need to provide bankruptcy documents, foreclosure docs, short sale paperwork, divorce decree, child support paperwork, alimony paperwork, and other paperwork needs to be provided.

The mortgage process will ensure all documents are legible and labeled properly for the underwriter. The processor will ensure all paperwork is updated, such as having the most recent paycheck stubs and bank statements. The mortgage processor will then submit the file to the underwriting department.

The Underwriting Step Of The Mortgage Process

After the mortgage process has the borrower’s file complete, labeled, and fully organized, the file is then submitted to the lender’s underwriting department. Mortgage underwriters will not waste time if the file is incomplete, missing pages, or not legible.

Underwriters have many files to underwrite daily and cannot be stuck in one file. Therefore, if a file is sloppy and not legible or has missing documents, it will get kicked back to the mortgage processor.

If it is kicked back to the mortgage processor, the file gets in the back of the line for underwriting again. This can cause a delay in the mortgage process. Getting a conditional loan approval will get delayed, and the clear-to-close may get delayed. If the clear-to-close gets, the home loan closing can get delayed.

Conditional Mortgage Loan Approval

Many experienced processors will not submit a file to underwriting unless every single piece of document is present. It may take a few days to get certain documents. Experienced mortgage processors will wait until they get that document before submitting it to underwriting.

To avoid stress during the mortgage process and avoid delays, mortgage processors need to prepare the borrower’s file meticously and label it accordingly before submitting it to the underwriting.

Some processors will submit whatever documents they have and have the underwriter condition the missing docs on the conditional loan approval. This is a bad habit; the last thing you want is conditional loan approval with dozens of conditions. The fewer conditions on the conditional loan approval, the quicker the clear-to-close will be issued.

The Role Of The Mortgage Underwriter

A mortgage underwriter will be assigned to the mortgage file. The mortgage underwriter will go over the file. Underwriters will ensure the file is complete and meets all the mortgage guidelines. The underwriter will thoroughly review the borrowers’ credit scores, credit history, income docs, asset information, and letters of explanation.

Once the mortgage underwriter feels comfortable with the applicant and sees that the borrower meets all guidelines, he or she will then issue a conditional mortgage loan approval.

Once the underwriter issues a conditional loan approval, the file returns to the mortgage processor. It is the mortgage processor’s job to gather all the conditions the mortgage underwriter requests. The loan originator is notified of the conditions. With the loan officer’s help, the mortgage processor works together to get the conditions.

Clearing Conditions For A Clear-To-Close

Once the borrower submits all the conditions, the processor will return the mortgage file to the mortgage loan underwriter for a clear-to-close. A clear to-close is great news. A clear-to-close means the lender is ready to fund the loan and send the closing paperwork to the title company.

Once the clear-to-close has been issued, the mortgage company’s closing department will contact the title company and make plans on a closing date.

The mortgage company will prepare and send the docs to the title company. At closing, once all closing docs have been signed and approved, the lender will wire funds. The homebuyer will get the keys, and ownership will change hands.

The Clear-To-Close

By this stage in the mortgage process, you are breathing a sigh of relief as you are in the final stages. Congratulations, you have made it through the hard part! Once you get the clear-to-close, the file goes to the closing department. For borrowers and loan officers.

Receiving the clear-to-close is like music to your ears! Once you receive the clear-to-close, the lender, realtor, and closing agent will work together to schedule a closing date.

The lender will work to prepare the required documents to be signed at closing. After receiving your clear-to-close (CTC), quality control checks will occur. Do not be alarmed if the QC process asks additional questions. This ensures that all the proverbial I’s are dotted, and T’s are crossed. It is a formality to protect the lender.

Steps Of The Mortgage Process After The Clear-To-Close

Three days before closing, borrowers will receive a series of disclosures. Final disclosures outline your loan details, including the cash-to-close. Upon receiving disclosures, it’s important to acknowledge them, as there are timing requirements for closing. Before closing, you will prepare a certified check to cover your cash-to-close.

Borrowers will also be given instructions on what they need to bring to closing, which will likely be your certified check, driver’s license or state-issued identification, and social security card.

Congratulations on making it to this stage. You are within a few days of homeownership! The Team at Gustan Cho Associates specializes in FHA, VA, USDA, Non-QM, Reverse Mortgages, FHA rehab loans, Conventional Loans, Jumbo Mortgages, One Time FHA and VA Construction Loans, Mortgage One Day Out Of Bankruptcy and Foreclosure, and alternative financing. Gustan Cho Associates has zero lender overlays on government and conventional loans.

Starting The Mortgage Process With A Lender With No Overlays

This article on the steps leading to a clear-to-close was written to inform our borrowers of the mortgage process. Gustan Cho Associates is a national mortgage company licensed in multiple states with no overlays on government and conventional loans. Over 80% of our borrowers at Gustan Cho Associates could not qualify elsewhere due to their lender overlays.

This holds true as long as the automated finding per Automated Underwriting System renders an approve/eligible, borrowers are set to go. This is because there are no lender overlays.

Many borrowers of Gustan Cho Associates have credit scores under 600 FICO. Many lenders require higher credit scores due to their overlays. FHA, VA, USDA, Fannie, and Freddie do not require borrowers to pay off outstanding collection accounts to qualify for these mortgages.