Funding Loans: Escrow Closing And What You Should Know

The process of closing escrow involves signing, funding, and recording. Funding is when the lender releases funds to the title company or escrow company, which then passes the money on to the seller. This usually happens one or two days before closing. Once the escrow company has confirmation that the funds have been received, they can close the escrow. The buyer is then able to take possession of the property.

The loan officer advises all parties that the final approval has been issued

The loan officer's issuance of the final approval is a significant milestone in the escrow process. It signifies that the buyer's loan application has been thoroughly vetted and approved, and the lender is now ready to proceed with the funding of the loan. This step provides assurance to all parties involved that the financial aspect of the transaction is secure.

Once the final approval is given, the loan officer will inform the buyer, seller, and other relevant parties, such as the escrow officer, title company, and real estate agents. This triggers the next phase, where the buyer's loan documents are prepared and sent to the buyer for signing. These documents typically include the Note, Deed of Trust, disclosures, and any other relevant addendums.

It is important to note that the final approval does not automatically guarantee funding. There are still crucial steps that need to be completed before the loan is officially funded. The buyer must carefully review and sign the loan documents, ensuring that all terms and conditions are understood and agreed upon. This process can take up to 48 hours or more, depending on the complexity of the transaction and the location of the lender.

During this time, the lender may also conduct a final review of the signed loan documents and any accompanying items provided by the escrow officer. This review ensures that all conditions of the loan have been met and that there are no outstanding issues or discrepancies. Once the lender is satisfied, they will issue the "Funding Condition List", which outlines the specific requirements for releasing the funds.

Upon completion of these steps, the lender will proceed with the funding of the loan. This involves transferring the funds to the title company or escrow company, who will then distribute the money to the seller and other relevant parties, such as appraisers and real estate agents. The funding date is typically the same as the closing date, but in some cases, it may occur a day or two earlier.

The buyer signs and notarises their loan documents

The escrow process can be a stressful and frustrating experience, so understanding the timeline and steps involved can help to reduce anxiety. Once the buyer has signed and notarised their loan documents, the process is almost complete. The buyer's loan documents will include the Note, Deed of Trust, and all accompanying disclosures and addendums. The Note provides evidence of the buyer's debt to the lender, a description of the loan terms, and a means for the lender to transfer or collect the debt. The buyer must also sign a compliance agreement, agreeing to cooperate with the lender or title company if any mistakes are found in the loan documents.

The buyer's loan documents will also include IRS forms W-9 and 4506, which allow the lender to report mortgage interest and obtain copies of the buyer's tax returns. Servicing disclosures inform the buyer if the lender will use a servicer to collect payments, and whether the lender intends to sell the loan to another lender or investor. The buyer will also sign tax and insurance escrow forms, which allow the lender to charge and hold funds to pay property taxes and insurance premiums. Affidavits may also be required, confirming the buyer's legal name and any other names used on accounts and legal documents, and that the buyer will occupy the home as their primary residence.

Once the buyer has signed and notarised their loan documents, they are returned to the Escrow Office. The Escrow Officer packages the documents and sends them to the lender for a prior-to-funding (PTF) review. The lender will then advise if anything further is required before funding the buyer's loan. This part of the process can cause delays, especially if the lender is out of state and documents need to be sent overnight. Once the lender has completed their review, they will issue the Funding Condition List.

The funding date is when the lender wires the loan funds to the title company or escrow company, and the transaction can be completed. The funding date is usually the same as the closing date, but it may be one or more days earlier. The closing date is when the local government records the lien against the property and the transfer of ownership. The escrow company or attorney will then distribute the funds according to the closing instructions from the lender.

The lender reviews the documents and authorises the transfer of funds

During this stage, the lender will typically confirm that the borrower's financial documents are in order and that the loan amount is correct. This includes reviewing the buyer's loan documents, such as the Note, Deed of Trust, and any accompanying disclosures and addendums. The lender will also ensure that the escrow company has provided all the necessary information, including the funding amount and the confirmation of wiring instructions. It is important to note that the lender will not proceed with funding until all the required documents have been signed and reviewed.

Once the lender is satisfied that all the necessary conditions have been met, they will notify the escrow company that they are ready to disburse the loan funds. This notification serves as confirmation that the lender approves the transfer of funds and authorises the escrow company to proceed with the closing of the transaction. The escrow company plays a crucial role in facilitating the transfer of funds by acting as an impartial third party and ensuring that all parties involved fulfil their obligations.

To ensure a smooth transfer of funds, it is essential to confirm all wiring instructions with the escrow company over the phone. This step helps to prevent wire fraud, which has become a significant concern in recent times. Additionally, it is important to provide the title company with any required statements of information before the funding of the loan. This proactive approach ensures a seamless funding process and minimises the chances of encountering issues on the funding day.

In summary, the lender's review of documents and authorisation of the transfer of funds is a critical step in the escrow process. It involves the lender carefully examining all the necessary paperwork, confirming the borrower's financial stability, and ensuring that all loan conditions have been fulfilled. This step sets in motion the disbursement of funds, bringing the parties one step closer to the completion of the real estate transaction.

The escrow company confirms receipt of funds and distributes them to the seller

The escrow process is an important part of purchasing a home, protecting both buyers and sellers during the transaction. An escrow account is a financial arrangement where a third party holds funds or assets on behalf of the transacting parties until specific conditions are met.

Once the buyer's loan documents have been signed, notarized, and returned to the Escrow Office, the Escrow Officer packages and sends them to the lender for a "prior to funding" (PTF) review. The lender then advises if anything further is required before funding the buyer's loan. Once the lender is satisfied, they will issue the "Funding Condition List".

The lender then contacts the escrow company, and the funding amount to be released is confirmed. The lender will then order the wire ahead of time, ensuring that the money is disbursed on the date of closing or up to two days later. The escrow company will then confirm receipt of the funds and distribute them to the seller and other third parties, such as appraisers and real estate agents.

The escrow company may also authorize recordation with the title company, which will then confirm receipt of all documents, funds, and statements of information. The title company will also pay off the seller's existing mortgage, any property taxes, and title fees. The remainder is then forwarded to the escrow company.

The title company records the transaction with the local government

The title company plays a crucial role in ensuring the accuracy and legitimacy of real estate transactions. They are responsible for verifying the accuracy of real estate records, including ownership, existing liens, and other potential claims affecting the property. This process involves scouring public records, deeds, tax liens, land records, court judgments, and other relevant documents. The title company also determines the "quality" of the title, whether it is “cloudy” or owned free and clear. This step is essential to ensure that the buyer acquires the title from the actual property owner or an authorized representative.

Once the title company has completed its due diligence and confirmed the accuracy of the property records, it facilitates the purchase by preparing and recording the necessary documents to transfer the title to the property. This includes ensuring that all required documents, such as deeds, lien releases, and written instructions, are appropriately signed and ready for the closing transaction. The title company acts as a safeguard, ensuring that all parties involved have the necessary information and protections in place before the transaction is finalized.

In addition to verifying ownership and claims, the title company also plays a role in ensuring that all property expenses are current. This includes checking with government agencies to confirm the payment status of property taxes, utilities, association dues, and any other outstanding payments that could result in a lien against the property. By doing so, the title company helps protect the buyer from inheriting any unforeseen financial burdens or liabilities associated with the property.

After the closing of the real estate transaction, the title company continues to provide essential services. They issue a title insurance policy that protects both the buyer and the lender against potential problems with the title. For example, if a third party claims to have a valid lien against the property that was not identified during the initial title search, the title company will take the necessary steps to resolve the claim. This added layer of protection provides peace of mind and financial security for all parties involved.

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