O C F I T B L O G Mortgage Home Loan Closing on Purchase and Refinance Transactions

Home Loan Closing on Purchase and Refinance Transactions

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This article covers the home loan closing on purchase and refinance transactions. The home loan closing is the final step of the overall mortgage loan process. The closing is where ownership changes hands between home buyer and seller. In this article, we will cover the mortgage process leading to the home loan closing. We will also explain the road to the clear-to-close. We will explain the mortgage process from the role of the loan officer, processor, and underwriter and the importance of gathering complete updated documents so there is no delays on the home loan closing. The pre-approval stage of the mortgage process is the most important. The mortgage processor plays an important role in having a smooth mortgage process. As long as the borrower has been properly qualified, there should be no reason why every file should not close on time.

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The Art of a Stress Free Home Loan Closing

The home loan closing is supposed to be an exciting day for everyone. The home buyer is officially the owner of the home and gets their keys. The seller gets their money. Both the loan officer and real estate agent get paid their commission. The road to the home loan closing often is stressful. However, the road process to the home loan closing does not have to be stressful. A home loan closing should never get delayed. All closings should close on time. A home loan closing is the finish line in the mortgage process. In order for a home closing to take place, the mortgage underwriter needs to issue a clear-to-close.

What Does Home Loan Closing Mean

The term “home loan closing” refers to the final step in the process of purchasing a home with a mortgage. This is the point at which all parties involved in the transaction finalize the deal, and the legal transfer of ownership takes place. Here are the key aspects of a home loan closing. The closing date is set during the negotiation phase and is specified in the purchase agreement. The closing typically takes place at a title company, escrow office, or the lender’s office. Before the closing, the lender provides the borrower with a Closing Disclosure, which outlines the final loan terms and closing costs. The borrower has the right to review the CD at least three business days before closing.

Final Walk-Through

Before closing, the buyer usually has the opportunity to conduct a final walk-through of the property to ensure that any agreed-upon repairs have been completed, and the property is in the expected condition. At the closing, both the buyer and seller (or their representatives) review and sign various documents. These documents include the mortgage note, the deed of trust or mortgage, and other legal and financial paperwork.

Payment of Closing Costs

The buyer is required to pay closing costs, which may include fees for services such as the appraisal, title search, title insurance, and legal fees. The buyer may also need to bring a cashier’s check or arrange for a wire transfer to cover the down payment and closing costs. Once all the documents are signed, the lender disburses the loan funds to the seller, and the buyer takes possession of the property. The signed documents, including the deed and mortgage, are typically recorded in the local county or city land records. This process officially transfers ownership and secures the lender’s interest in the property.

What is a Clear-to-Close

A clear-to-close is when the mortgage underwriter has reviewed all of the conditions on conditional loan approval. A clear-to-close is when the underwriter has signed off on the loan. A clear-to-close is when the closing docs are ready to be sent out to the title company. The mortgage company is ready to wire the funds for the home loan closing to the title company. The home loan closing, again, is the finish line of the mortgage process. It is at the home loan closing where the title changes hands from seller to buyer. Also, funds are dispersed. Once the docs are signed and funds are exchanged, the keys are handed over to buyers.

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Steps Leading to Home Loan Closing

To understand the steps leading to the home loan closing, borrowers need to understand the steps of the mortgage processBorrower first consults with a loan officer: The loan officer will have the borrower complete a 4-page mortgage loan application called 1003. Loan Officers runs the credit. Makes sure the borrower qualifies with the right credit scores, review credit history, review assets, liabilities, run automated underwriting system. The loan officer qualifies the borrower. The loan officer makes sure borrower meets the mandatory waiting period after bankruptcy, foreclosure, short sale, or deed in lieu of foreclosure. The mortgage loan originator also makes sure there are no credit disputes.

Shopping For a Home After Getting Pre-Approved

After the borrower qualifies and meets all the guidelines, the loan officer issues pre-approval. The pre-approval stage is the most important part of the loan approval process. If the borrower has been properly qualified, there is no reason why the home loan should not close. The borrower takes pre-approval and hires a real estate agent. Starts shopping for his or her dream home. Borrower shops for home. Homebuyer makes offer. Gets an executed real estate purchase contract. Most closing takes 30 to 45 days to close. There are contingencies on home purchase contracts such as home inspection and finance contingencies.

Steps in the Mortgage Process Leading to Closing

The mortgage process starts once the home buyer submits the executed home purchase contract to the loan officer: The loan officer sends out disclosures to the borrower for signature. The file gets assigned to the mortgage processor. Processor collects mortgage documents. Mortgage processor or loan officer orders a home appraisal. The processor submits the file to the mortgage underwriter. The underwriter issues conditional loan approval. Talk To Us For Steps In Mortgage Process Leading To Closing, Click Here

The Importance of Updated Documents

It is the job of the processor to get updated recent documents. Expired or older documents will get kicked back by the underwriter… Examples of conditions include VOE, VOR, VOD, and updated paycheck stubs and updated documents as well as additional documents: The processor quarterbacks with the loan officer and the borrower.

The mortgage processor gathers all the conditions. This includes the home appraisal. The mortgage processor gathers all the conditions of the conditional loan approval.

The processor then submits the conditions back to the mortgage underwriter for a clear to close. The mortgage underwriter may find more conditions. If so requests it to the mortgage processor. The underwriter issues a clear-to-close after signing off all conditions. A clear-to-close is when the mortgage loan underwriter signs off on the mortgage loan and clears it for doc preparation and funding.

Next Step In Mortgage Process After Clear to Close Leading to Closing

The file goes to the closing department and funding department where they make arrangements for a home loan closing with the title company: The loan processors schedules the closing date. Lender prepares and sends closing docs to the title company. The title company and lender go over the Closing Disclosure. Buyers and Sellers meet at home loan closing. Buyers and sellers sign closing docs. The lender wires the funds to the title company. Home buyers get keys at home loan closing.

Clear-to-Close and Prepping Docs and Wire

As mentioned earlier, a clear-to-close is when a mortgage underwriter has cleared all of the borrower’s conditions listed on the conditional mortgage loan approval. In order to schedule a home loan closing, the underwriter needs to issue a clear-to-close. There is a three-day mandatory waiting period to schedule a home loan closing after a clear-to-close due to new mortgage regulations called TRID. TRID went into effect in October 2015. The lenders need to disclose the Closing Disclosure three days prior to closing. The Closing Disclosure, referred to as the CD, has the final numbers for the buyers and sellers.

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Scheduling The Home Loan Closing After The Final Closing Disclosure

Here is what the Closing Disclosure is:

  • The New CD is the replacement of the old HUD-1 Settlement Statement
  • The Closing Disclosure is the line item of charges and fees from both sides
  • The CD reflects the cash to close from the home buyer and funds to the home seller
  • The title company and title agent will compile the figures of the buyers and sellers

The mortgage lender will sign off on the final CD and then authorizes to fund the loan. The buyer receives the keys to the property, and the closing agent provides a closing statement detailing the financial transactions of the closing. The home loan closing is a crucial step in the homebuying process, and it’s essential for all parties to be well-prepared and informed. Buyers and sellers often work with real estate agents, attorneys, and title companies to navigate the complexities of the closing process.

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