This BLOG On Clear To Close On FHA Loans Mean For Borrowers Was UPDATED And PUBLISHED On November 19th, 2019
What Does Clear To Close On FHA Loans Mean For Borrowers?
Clear To Close On FHA Loans means the following:
- Borrower met all FHA Guidelines
- The borrower has met all conditions from the mortgage underwriter’s conditional mortgage approval
- Verification of funds has been met and the buyer has qualified seasoned funds to close on their FHA Loan
- The underwriter has signed off on the borrowers and has authorized the lender to prep docs
- The FHA Loan is ready to fund once the title company has the final Closing Disclosure
In this article, we will cover and discuss clear to close.
Steps Leading To Clear To Close On FHA Loans
The clear to close on FHA Loans is the finish line where all borrowers, loan officers, realtors, and everyone in the mortgage process want to get to. Clear To Close On FHA Loans means the borrower is fully approved and the lender is ready to preparing closing documents and wire funds.
There are multiple stages in the mortgage approval process.
- The first stage is getting the mortgage loan applicant pre-approved
- The mortgage loan borrower needs to complete a mortgage loan application
- Completes a 4 page 1003 mortgage application
- The mortgage loan originator will go over the 1003 mortgage application
- Loan Officer will make sure all the information completed by the mortgage applicant is correct and complete
- The loan officer then runs a tri-merger credit report
- Once the mortgage loan originator gets the results of the tri-merger credit report, he or she then contacts the mortgage applicant to go over the credit report, credit scores and make sure there are no errors
- The mortgage loan originator then submits the mortgage file to the automated underwriting system for an automated approval
- An automated approval per DU FINDINGS or LP FINDINGS is what is needed for the loan officer to proceed with the borrower’s mortgage loan process
- Loan Officer request documents required to process mortgage loan
- Reviews docs and assigns it to the processor
- Processor processes file and get it ready for underwriting
- Mortgage Underwriter reviews the file and issues pre-approval
Shopping For A Home After Pre-Approval
All pre-approvals from mortgage lenders are not equal.
- Loan Officers should not sign off on any pre-approval for home buyers
- Loan Officers are not mortgage underwriters
- All pre-approvals should be reviewed, processed, and underwritten by a mortgage loan underwriter
- Gustan Cho Associates Mortgage Group is a direct lender with no overlays on government and conventional loans
- All of our pre-approvals are full credit mortgage loan approvals that have been processed, underwritten, and signed off by the mortgage underwriter
- Over 75% of our borrowers are folks who either gotten a last-minute loan denial and/or are folks who are stressing over the mortgage process because they were not properly qualified
With a solid pre-approval that has been fully underwritten and signed off by a mortgage underwriter, homebuyers can rest assured that their home loan will not just close, but close on time.
Mortgage Process After Pre-Approval
Once borrowers get an approve/ eligible per DU or LP FINDINGS with a solid TBD Property Underwriting Pre-Approval that has been fully underwritten and signed off by a mortgage underwriter, they can go and shop for a home.
- Once the buyer gets a home they like to purchase, they can enter into a real estate purchase contract
- Submit real estate contract to the mortgage lender
- The mortgage loan originator will send out Loan Estimate and disclosures for signature
- Need to provide updated mortgage documents such as updated paycheck stubs and 60 days bank statements, and other documents pertaining to processing and underwriting
- Mortgage loan application and documents get processed by a mortgage loan processor
- Loan package gets assigned back to mortgage loan underwriter who issued the initial conditional mortgage approval
Conditional Mortgage Loan Approval
If everything goes well, the underwriter will issue borrowers a conditional mortgage loan approval. All of our pre-approvals at Gustan Cho Associates are conditional mortgage loan approvals. All pre-approvals are fully underwritten and signed off by mortgage underwriters. Once a pre-approval letter is issued by the mortgage underwriter, the borrower can now shop for a home. All of our pre-approvals at Gustan Cho Associates close because they are conditional mortgage loan approvals.
- A conditional mortgage loan approval is a letter of intent where the lender is able to grant the borrower a formal mortgage loan approval and clear to close once all conditions have been submitted
- Conditions include the following:
- Home appraisal
- Appraisal review
- Verification of employment
- Updated pay check stubs
- Updated bank statements
- Letter of explanations for larger or irregular deposits
- Documents missing
- Income tax verification with IRS
- Other items or proof on those items listed on the mortgage application such as the following:
- Bankruptcy papers
- Foreclosure papers
- HUD settlement statement if the borrower had a prior short sale
- Insurance company information
- Other information
Clear To Close On FHA Loans Means Lender Is Ready To Fund
A clear to close is when a mortgage lender is ready to fund and send out mortgage documents to the title company.
- A clear to close is the ultimate mission and goal of the mortgage approval process
- Getting a clear to close from the mortgage lender means that all of the mortgage conditions have been met
- The mortgage lender has given everyone a thumbs up to go ahead an schedule the closing
- The lender is ready to prep closing docs and wire funds to the title company
- The lender will do a final verification of funds prior to issuing a clear to close
- The closing department will do a final credit soft pull on the mortgage loan borrower
- Once the final approved Closing Disclosure (HUD settlement statement) is signed by all parties
- The wire is released by the mortgage lender
- The real estate transaction is officially closed and keys are exchanged
For more information about this article and/or to qualify for a mortgage with a direct lender with no overlays, please contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at email@example.com.