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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. It's a green light for lenders to order closing documents and for borrowers to schedule their loan closing.

To be sure, the clear to close (CTC) is an important milestone. But it's still not a guarantee you're getting that loan.

"Prior to" Underwriting Conditions

There are two primary types of underwriting conditions:

  1. "Prior to documents" conditions
  2. "Prior to funding" conditions

"Prior to documents"

The first category represents the bulk of the underwriting process. These are the major conditions that underwriters want to see satisfied before they order the final closing documents. Hence, the "prior to documents" moniker.

Common "prior to documents" conditions revolve around verifying a buyer's income, employment and assets, along with satisfactory VA appraisal, homeowners insurance and title work. Prospective buyers can help speed the process along by responding to document requests as quickly as possible.

Would-be buyers who satisfy the lender's "prior to documents" conditions happily receive their clear to close. At that point, lenders will start working on the Closing Disclosure and other documents needed for the loan closing.

Is Closing Disclosure the same as Clear to Close (CTC)?

When a lender produces a Closing Disclosure, this means you are in the clear to close on your VA home loan. A Closing Disclosure is a document that will layout the final loan fees and costs for the buyer.

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"Prior to funding"

Nearly all buyers will have "prior to funding" conditions attached to their loan file after receiving the clear to close.

These conditions are usually more procedural in nature, like verifying a buyer's employment again before closing or ensuring the purchase agreement is valid through the loan's funding.

Lenders may need to make sure updated tax transcripts are in your file or that any letters of explanation are signed and satisfy their needs.

When Does the Lender Commit to Funding?

VA buyers need to understand that a clear to close doesn't commit the lender to funding your home loan. Prospective buyers will still need to satisfy those "prior to funding" conditions for a loan commitment to take full effect.

For example, lenders aren't going to move forward if they discover you've lost your job right before closing. Lenders will also review all of your closing day paperwork to ensure the signatures are in place and that all "prior to funding" conditions are met.

Most VA buyers who receive their clear to close go on to land that home loan. But don't take your CTC for granted. Work hard to keep your income, employment and credit in great shape until your new loan is funded and your mortgage is recorded with your county.

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