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Clear to Close On Mortgage And Timeline From Application To CTC

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Clear to Close On Mortgage And Timeline From Application To CTC

This BLOG On Clear to Close On Mortgage And Timeline From Application To CTC Was UPDATED On September 13th, 2018

What does clear to close mortgage mean? A clear to close on mortgage (CTC) is ultimately the finish line in the mortgage process.

  • A clear to close is when the mortgage lender have processed the mortgage loan application.
  • Clear To Close are issued by mortgage underwriters.
  • Prior to CTC, the mortgage underwriter has underwritten the mortgage loan.
  • The mortgage loan applicant has provided all of the conditions requested by the mortgage loan underwriter.

Documents Reviewed By Mortgage Underwriter Prior To CTC

All mortgage documents is scrubbed by the mortgage processor before it is submitted to the mortgage underwriter. Any incomplete mortgage docs will be kicked back to the mortgage processor by the underwriter. Incomplete mortgage docs are one of the main reasons for delays in the mortgage process.

The following documents will be thoroughly reviewed by the mortgage underwriter prior to issuance of a CTC:

  • Updated bank statement
  • Update
  • Paycheck stubs
  • Final verification of employment has been confirmed. 
  • Some mortgage lenders have a quality control department that every mortgage application needs to go though prior to a clear to close can be issued. 
  • The quality control department has a quality control mortgage loan underwriter who will review the original mortgage underwriter’ work.
  • This is done to make sure there is no mistakes made and that the mortgage loan can be sold on the secondary market to Fannie Mae or Freddie Mac. 
  • Once a clear to close has been issued, the mortgage lender prepares docs.
  • A clear to close means that funds can get wired once final figures are approve.
  • With a CTC, the mortgage loan can close. 
  • All docs need to be complete, verified, and make sure that is is insurable on government loans.
  • Conventional Loans are double checked to make sure that the lender can sell it to the secondary market and need to meet Fannie and/or Freddie Mortgage Guidelines.
  • Mortgage loans that are backed by FHA, Federal Housing Administration, require additional items than conventional mortgage loans which we will discuss in the following paragraphs

About The Federal Housing Administration

FHA is not a mortgage lender.

  • The U.S. Department of Housing and Urban Development (HUD) is the parent of the Federal Housing Administration (FHA)
  • FHA insures and guarantees FHA Loans to banks and private lenders in the event borrowers default on their FHA Loans and goes into foreclosure
  • FHA will insure lenders against losses due to the default on FHA borrowers Due to FHA’s guarantee and insurance, many lenders are able to originate mortgage loans with 3.5% down payment and low mortgage interest rates
  • Due to FHA Guarantee, lenders are able to offer low down payments
  • Also due to the guarantee, lenders can originate mortgage loans for borrowers with prior bad credit  age lenders need to adhere to the FHA mortgage lending guidelines and must make sure that every FHA mortgage loan application meets the guidelines set by FHA in order for FHA to be able to insure the m
  • Many home sellers refuse to sell a property to a FHA approved home buyer
  • This because they feel that FHA loans are much tougher than conventional mortgage loans especially when it comes to appraisals
  • This is not the case
  • A home buyer who is FHA approved needs to get an FHA appraisal done on the subject property
  • Conventional home buyers need to get a conventional appraisal done
  • The only difference between a FHA appraisal and Conventional appraisal is that safety and security is stressed with a FHA appraisal
  • Both conventional and FHA appraisals need to have the property habitable
  • All mechanical systems needs to be in working order as well as the utilities functional when the appraiser is present appraising the home
  • FHA mortgage lenders go through the same process as conventional mortgage lenders in requiring the documents
  • Again, all documents such as two years tax returns, two years W-2s, 60 days bank statements, 2 year employment and residence history, and other documents pertaining to the mortgage application need to be complete without missing pages
  • Nothing is different between the processing and underwriting for both mortgage loan programs. 
  • Both FHA and Conventional mortgage lenders require IRS 4506T tax verification from the Internal Revenue Service
  • All lenders will require employment verification form the current employer
  • Both FHA and Conventional Lenders will require two years seasoning requirement to be able to use part-time income, overtime income, and bonus income

Final Conditions For Clear To Close On Mortgage

Mortgage underwriters will require a final verbal verification of employment and final verification of funds prior to issuing Clear To Close On Mortgage:

  • Updated bank statements may be required by borrowers
  • A final verbal verification of employment will be done by the mortgage underwriter prior to Clear To Close On Mortgage
  • Once the mortgage underwriter feels comfortable that all conditions have been met, the mortgage underwriter will issue a clear to close which means that they are ready to fund the loan
  • Once a cleared to close has been issued, the lender will then prepare docs and wire the funds to the title company

Mortgage Process And Clear To Close On Mortgage

What happens after clear to close?

  • The mortgage process and clear to close process timeline is the same for both FHA and Conventional Loans as well as other loan programs
  • Many home sellers are worried about clear to close on mortgage process timeline
  • Most mortgage loans should close in 30 days
  • FHA loans are one of the most popular mortgage loan programs in today’s market and many times is easier to get a FHA loan cleared to close than a conventional loans
  • The reason being is because FHA guidelines have much lax debt to income ratio caps than conventional loan programs
  • Conventional Borrowers with less than 20% down payment require private mortgage insurance like FHA MIP
  • Private Mortgage Insurance varies on borrowers credit and income profile and may take time to get PMI approved
  • FHA has a maximum 46.9% front end DTI and 56.9% back end debt to income ratio requirements whereas conventional mortgage loan programs have a cap on debt to income ratios at 50%
  • If a conventional loan borrower has a slight increase on homeowner insurance policy and that home loan borrower is on the 50% debt to income ratio cap, that slight increase can blow the deal
  • This is because they went over the 50% debt to income ratio cap
  • With FHA loan programs, borrowers have up to 56.9% and plus, with FHA loans, borrowers can have non-occupant co-borrowers as well as 100% gift funds

When Can Mortgage Close After CTC?

Due to new TRID Mortgage Guidelines, once a CTC is issued, there needs to be a three day waiting period before a loan can close. Just because a clear to close has been issued does not mean that the closing is guaranteed. Up to the date of the closing, borrowers should not do the following:

  • Apply for new credit
  • Shop for new furniture
  • Make irregular deposits or withdraw funds from bank accounts
  • Quit their jobs
  • Be late on payments

Lenders can pull credit up to the date of closing. Lenders may do a final Verification of Employment, Verification of Deposit, or other QC control up to the date of closing.

Qualifying For Mortgage With Direct Lender With No Overlays

Home Buyers or homeowners needing to qualify for mortgage with a direct lender with no mortgage overlays can contact us at The Gustan Cho Team at Loan Cabin Inc. at 262-716-8151 or text us for faster response. Or email us at gcho@loancabin.com. We are available 7 days a week, evenings, weekends, and holidays.

  1. Carolyn says

    Hi should I start the application process to get detailed feedback on what I need to qualify?

    If there is an update pending that may impact my score will a new report be pulled that may improve my interest rate? Does this show as 2 inquires?

    Thanks.

    1. Gustan Cho says

      You can call me at 800.900.8569 or go to https://gustancho.com/fast-quote To qualify for a FHA Loan, you need a minimum credit score of 580 credit scores. Open collections and charge offs are fine as long as you have been timely with all of your payments in the past 12 months. Maximum debt to income ratios will be limited to 43% debt to income ratios for borrowers with credit scores of 43% DTI and under. Debt to income ratios can be as high as 56.9% DTI if your credit scores are 620 FICO or higher. Interest rates will depend on your credit scores. The best interest rates for FHA Loans, you would need a 640 FICO credit scores or higher. Please feel free to call me or email me with any questions.

      Gustan Cho NMLS 873293

  2. Gustan Cho, NMLS 873293 says

    The clear to close is the finish line of the mortgage process. The CTC on mortgage is when the mortgage underwriter signs off on the loan and authorizes the lender to prepare closing documents and gives a thumbs up in wiring the funds

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