Your Mortgage Closing: What to Expect and How to Prepare

Blog posted On March 27, 2025

Your offer has been accepted, you’ve sent your earnest money in, and you’ve started working with your trusty mortgage team. Their goal is to get your loan through underwriting and fully approved for your closing. However, you’ve heard a lot of financial terms bandied about, and you’re feeling a little overwhelmed by all the “mortgagese” thrown around in this industry. Ready for an overview of your loan closing process to help clear things up? Let’s jump right into it!

Understanding Mortgage Terms

During your home closing process, it can be tricky to wrap your head around all the jargon and terms, especially for first-time home buyers. What’s PMI? DTI, LTV, CTC, CD, so many acronyms to keep track of! Below are a few important terms to keep in mind:

• Loan-to-Value Ratio (LTV): An LTV ratio is calculated by dividing the amount borrowed by the appraised value of the property, expressed as a percentage. An LTV of 80% means the mortgage loan is for 80% of the value of the property, with the borrower making a 20% down payment
• Debt-to-Income Ratio (DTI): Your DTI ratio represents the total amount of debt you owe compared to the total amount of money you earn each month, measured as the percentage of your monthly gross income that goes to paying your monthly debt payments
  • Example: If your gross monthly income is $6,000 and your debt adds up to $2,000 a month, you divide the debt by your income. Therefore, your debt-to-income ratio is 33 percent ($2,000 is 33% of $6,000)
• Clear to Close (CTC): The golden term in mortgage closing, CTC essentially means that underwriting has greenlit the loan for closing
• Private Mortgage Insurance (PMI) and Mortgage Insurance Premium (MIP): PMI is mortgage insurance required on Conventional Loans with a down payment below 20%, which is added on as a portion of your monthly mortgage payment. MIP is the mortgage insurance required on all FHA Loans, regardless of the size of your down payment. There’s both an upfront premium (UFMIP) and an annual premium payment
• Closing Disclosure (CD): Your initial CD is a breakdown that includes fees like your purchase price, loan fees, estimated real estate taxes, title costs, insurance, closing costs, and various other expenses besides — you must sign the CD three business days prior to closing!

The Step-by-Step Process

Simply, here’s a quick snapshot of your mortgage closing process, easily laid out in these 6 steps:

1. Loan Processing
2. Underwriting
3. Conditional Approval
4. Clear to Close
5. Closing
6. Loan Funding

Homeowners Insurance

It’s vital to set up your homeowners policy with a reliable insurance agent. Your closing could be delayed if your policy isn’t created with the correct information as underwriters often have strict requirements for property home coverage. It’s for a good reason — they want to ensure your home is fully insured. Your insurance requirements could be even steeper if you live in a flood zone, which will require you to obtain flood insurance separate from your regular homeowners policy. Here are a few important insurance items that your agent will need to provide us ahead of time:

• Policy declaration page or binder providing 12 months of coverage
• Invoice or paid receipt
• Replacement Cost (noted on policy) or a separate Replacement Cost Estimator (RCE) document

Please Note: If your closing date does move up, even by a day, be sure to call your homeowners insurance agent to adjust the policy periods. Your policy period cannot start after your closing. It can start up to 15 days before your closing but never after.

Title Insurance

Title insurance offers protection from problems with a property’s title, including liens, ownership disputes, and encroachments. It’s a safeguard for both the lender and the home buyer against potential issues with the deed once it’s transferred from the previous owner. We as the lender will request this and update the old title insurance with our mortgagee clause and your information. On top of the title policy, we receive the Closing Protection Letter (CPL), the title invoice, and the Wire Instructions.

Your Closing Date

It seems simple: you’ve received CTC, you’ve signed your closing disclosure three days prior to your closing, and your closing date is set with the title company and the sellers — you’re ready to move! What else left is there to do? We just ask that you set realistic expectations, even at this final stage. Maybe the seller needs to move up or push back the date for various reasons. Delays can happen at any stage. We also ask that you try not to move your own closing date willy nilly. You may need to update your insurance policy effective dates for instance. We may also need to reverify your employment if the closing gets pushed back. Things like that to keep in mind!

We hope you now feel ready to take on homeownership since we’ve ironed out some of the details of the loan process itself. You’ll have a team working with you throughout the loan processing period, so if you need anything clarified or re-explained, we’re here to help you, every step of the way.

Source: Bankrate, Realtor.com, Investopedia