Closing and funding are the final chapters in the mortgage loan process. Closing occurs when borrowers sign loan documents at the title company. Funding occurs after a lender reviews the signed loan documents and wires their funds to the title company.
A home loan becomes official after funding – which can take hours after closing. For purchase transactions, buyers are not allowed to access the home until a loan is funded; therefore, they should plan accordingly when scheduling new home services (like movers, cable, painters, etc.)
Closing and Funding
The timing of a loan’s funding depends on the loan’s purpose (purchase vs. refinance), the occupancy (owner occupied vs. non-owner occupied), and the seller (individual vs. a builder).
Most purchase home loans (and non-owner-occupied refinances) close and fund on the same day. Conversely, refinances on primary homes mandate a three-day-rescission period before funding (see below for more details).
Mortgage Loan Process Outline
Click here for an overview on each step.
- Loan Packaging & Lender’s Disclosures (1-2 days)
- Loan Setup (2-3 days)
- Processing / Credit Approval (2-3 days)
- Initial Underwriting Approval (2-3 days)
- Sign the Initial Closing Disclosure (CD) (Immediate)
- Final Underwriting Approval (1-2 days)
- Docs to Title / Final CD Issued (1-2 days)
- Closing & Funding (TBD) <– YOU ARE HERE
- After Closing
Scheduling the closing
The scheduling of closing varies every transaction. Often times the title company will reach out to the borrowers a few days before closing to schedule the details. In other instances, borrowers and Realtors are proactive and contact title to schedule the closing.
Most title companies won’t allow a definitive closing time to be scheduled until a few days before closing. A handful of title companies won’t even allow a closing to be scheduled until they have the lender docs.
What happens at closing
The closing process typically takes about 45 to 60 minutes. All borrowers, including non-purchasing spouses, must be present to sign the closing documents (unless a power of attorney is created in advance).
After all parties (i.e. the buyers and sellers) sign the loan documents, the title company electronically sends the signed loan documents to the lender for funding authorization.
The lender will review the signed documents and then provide the title company with a “funding number” to access their wired funds. The title company provides the official notification to all parties that a loan has funded
Funding typically occurs within a few hours after all parties sign the closing documents.
New construction funding timeline
The funding process for newly constructed homes typically takes longer to fund. This is because there is an extra step in the process. New construction home loans typically aren’t considered funded until the title company disperses funds to the builder’s bank.
Because builders finance the construction of the home, those loans must be paid before funding is finalized. This means that new construction home loans aren’t considered funded until AFTER the title company disperses funds to the builder’s bank. This adds time to the funding process.
The bank wires typically can’t be sent, or received, after 2:00 or 3:00 p.m., depending on the bank. This means that the title company needs to have the lender’s funds well before these cutoff times since they need time to send their own wire to the builder’s bank.
For new construction we would recommend scheduling movers and deliveries the day AFTER closing. Unfortunately a moving van waiting in the driveway won’t expedite the funding process.
Keys and possession
We, the lender, are not involved with taking possession of the home. Contact the Realtor to determine how to gain access to the home. (For new construction, the builder will provide the keys after funding).
The following are various methods for acquiring the keys:
- The sellers may leave the keys at the title company and require that funding occur before title releases the keys. This means you either need to wait around for funding, or go back to the title company after funding to pick up the keys.
- The Realtor provides the keys to the buyers after funding occurs. Off the record, the Realtor often provides the keys to a buyer before funding with the understanding that the buyer waits for the official funding before visiting the house.
- Occasionally the sellers will be involved and dictate how to access the keys via lock box.
Ultimately you need to check with your Realtor to determine how the keys will be provided.
Funding refinances (3-days later)
There is a mandatory three day waiting period between closing and funding an owner-occupied home. These three days do not include Sundays or Federal holidays.
Refinances on vacation homes and investment properties do not have this waiting period and those loans fund the same day as closing.
This three day rescission period is to allow borrowers the time to ultimately determine if they want to finalize their loan and allow funding to happen.
This is actually crazy when you think about the amount of time and effort that is spent to get a loan to closing. To have someone actually go through the whole process, sign the loan documents, only to cancel the loan a few days later is nuts. Nonetheless it’s required.
Rescission period examples
If a refinance on a primary home closes on a Thursday, the loan will fund the following Tuesday. This is because Friday is day 1, Saturday is day 2, and Monday is day 3 of the rescission period. (This is assuming that Friday, Saturday, and Monday aren’t Federal holiday).
In the same manner as above, a loan that closes on a Tuesday will fund the following Monday. The waiting days are Wednesday, Thursday, and Friday. Note: loans don’t fund on weekends since the banks won’t send and receive wires.
Be sure to check out our after closing section to learn what happens days, weeks, and months after closing.
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