VA Loans and Clear to Close (CTC): What it Means for Veterans
Receiving your clear to close is an exciting milestone in your VA homebuying journey.
You’ve completed your VA mortgage application and provided your lender with everything they’ve asked for, and you’re super excited you’re clear to close.
It’s time to breathe a sigh of relief! This means most of the hard work is out of the way and it’s a good sign that you’re going to get the loan you’ve been waiting for. But you’re not completely done yet. There are still a few more steps you’ll need to take before you finally get the keys to your new home. Here’s what you need to know.
What Does Clear to Close Mean?
When your VA lender lets you know that you’re clear to close, it means you’ve satisfied all of the major conditions required to close on your VA mortgage.
Once you’re clear to close, you should be able to finalize a date and time to close on your loan. The lender and title company will get things in motion regarding the paperwork you’ll need to sign.
How Long Does It Take to Get Clear to Close on a VA Loan?
Closing timelines can vary depending on the lender, your unique purchasing situation and other factors. VA loans typically close within 30 to 45 days from the time you submit your mortgage application.
While you won’t have complete control over the time it takes to reach clear-to-close status, you can help make sure things stay on track by providing all requested information as quickly as possible. It's also important to promptly respond to any communication you receive from your lender.
How to Get your VA Loan Cleared to Close
Before you’re clear to close, you’ll have to complete a series of important steps. This requires working closely with your loan team to make sure they have everything they need.
It's important to stay fully engaged throughout the process, as missing any of the following steps could delay your CTC.
1. Provide the necessary documentation
Prior to approving your loan application, your lender might need several essential documents so they can verify your income, assets and debt-to-income (DTI) ratio. This may include pay stubs, bank statements, tax returns and more.
Your lender will likely require additional information and documentation if you’ve had any recent large deposits or are using gift funds to pay for some or all of your settlement costs.
2. Have the home appraised and inspected
Lenders need to confirm the property you’re trying to purchase meets VA and their own requirements. To do this, you’ll need an appraisal and an inspection.
During the appraisal process, a professional third-party appraiser will evaluate the property to determine its fair market value. This helps ensure that you’re not paying more than what the property is actually worth. The lender will only lend the lesser of the purchase price or the appraised value.
VA loans don’t require home inspections, but they’re almost always a sound investment. During this process, a professional inspector will evaluate the home’s structure, including the electrical system, roof, plumbing and HVAC system.
3. Undergo the underwriting process
Once you’re under contract to purchase a home, your lender will review everything to determine the amount of risk involved in approving your loan. This is referred to as underwriting. In addition to inspecting your documents and verifying your information, the lender will also need to confirm that you have sufficient funds to pay the closing costs and down payment.
They’ll confirm the property has a clear title and you have the appropriate homeowners' insurance coverage. In some cases, you'll also need to show that you've purchased flood insurance. Before letting you know you're clear to close, the lender will also conduct a final credit check and re-verify your employment status.
What Happens After You’re Clear to Close?
While being clear to close is exciting, you’re not quite done. There are a few more important steps to complete.
1. Review and sign your closing disclosure
After everything has been approved and finalized, your loan officer will send you a closing disclosure. This document provides a comprehensive list of all the expenses you’ll need to pay as well as the terms and conditions of your mortgage agreement.
It’s critical that you take the time to read through your closing disclosure and make sure you understand all of the costs outlined. Be sure to check there aren’t any errors or clauses you weren’t expecting. Talk to your loan team if you have any questions.
2. Complete a final walk-through
Before you close, you’ll have a chance to take one more walk-through. While this isn’t technically a requirement, it’s your final opportunity to ensure the property is in the condition you and the seller agreed upon. Failing to do this could end up being a costly mistake. Once you close, anything wrong with the house is officially your responsibility.
3. Close on your VA loan
By the time you show up to your closing appointment, everything will be in order, and you'll be able to sign all the paperwork. This is when you officially take responsibility for your mortgage loan. At that time, you’ll also pay your down payment and closing costs and receive your new deed.
Can My VA Loan Still Be Denied After Clear to Close?
While it’s very rare for a lender to deny a loan at this point, it can happen.
In most cases, a denial after being cleared to close happens due to a major change in your financial circumstances. For example, you may run into trouble if you quit your job, take out another loan, or apply for a credit line. The best way to avoid this is to make sure you don’t make any drastic changes until you’ve closed on your new property.
At the end of the day, getting your clear to close is an exciting mile marker in your VA mortgage journey, and you’re one step closer to moving into your new home.
