What Do I Need To Know About Home Loan Closing


Home Loan Closing?

This BLOG About Home Loan Closing Was Written By Gustan Cho

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   . A Clear To Close is the following:

  • The mortgage underwriter has reviewed all of the conditions on a conditional loan approval
  • The mortgage loan underwriter has signed off on the loan
  • The mortgage loan docs is 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 and it is at the home loan closing where the title changes hands from seller to buyer and funds are dispersed. Once the docs are signed and funds are exchanged, the keys are handed over to the home buyer.

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 process :

  • Borrower first consults with a loan officer: Loan officer will have the borrower complete a 4 page mortgage loan application called the 1003. Mortgage Loan Officer will run credit, make sure the borrower qualifies with the right credit scores, review credit history, review assets, liabilities, run automated underwriting system
  • Loan officer qualifies borrower. Makes sure borrower meets the mandatory waiting period after bankruptcy, foreclosure, short sale, or deed in lieu of foreclosure.
  • Loan officer issues pre-approval. Pre-approval stage is the most important part of the mortgage loan approval process. If the borrower has been properly qualified, there is no reason why the mortgage loan should not close
  • Borrower takes pre-approval and hires real estate agent and starts shopping for his or her dream home
  • Borrower shops for home and makes offer and gets an executed real estate purchase contract. Most home loan closing takes 30 to 45 days to close. There are contingencies on the home purchase contract such as home inspection and finance contingencies
  • Mortgage process starts once the home buyer submits the executed home purchase contract to loan officer
  • Mortgage loan officer sends out disclosures to borrower for signature
  • File gets assigned to mortgage processor
  • Mortgage Processor collects mortgage documents
  • Mortgage processor and/or loan officer orders home appraisal
  • Mortgage Processor submits mortgage file to mortgage underwriter
  • Mortgage underwriter issues conditional loan approval. Examples of conditions includes VOE, VOR, VOD, and updated paycheck stubs and updated documents as well as additional documents
  • Mortgage Processor quarterbacks with Loan Officer and Borrower and gathers all the conditions including the home appraisal
  • Once mortgage process gets all the conditions that is required by the conditional loan approval, the mortgage processor submits the conditions in back to mortgage underwriter for a clear to close
  • Mortgage underwriter may find more conditions and if so requests it to the mortgage processor
  • Once all conditions are checked off by mortgage underwriter, the mortgage underwriter will issue a clear to close
  • A clear to close is when the mortgage loan underwriter signs off on the mortgage loan and clears it for doc preparation and funding
  • The file goes to the closing department and funding department where they make arrangements for a home loan closing with the title company
  • A home loan closing date is scheduled
  • Docs are sent to the title company
  • Title company prepares Closing Disclosure with proper figures
  • Buyers and Sellers meet at home loan closing
  • Buyers and Sellers sign closing docs. Wire is sent to title company
  • Funds get dispersed and home buyer get keys at home loan closing

Clear To Close

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 mortgage loan 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 on October 2015. Under TRID, there is a three day waiting period after the Closing Disclosure has been disclosed to schedule a home loan closing. The Closing Disclosure is also referred as the CD. 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

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