What Happens After Appraisal and Underwriting?

After a home loan application undergoes appraisal and underwriting, significant progress has been made toward securing financing. These stages confirm the property’s value and the borrower’s financial capacity, moving the process beyond initial application and preliminary checks. This phase marks where the lender prepares to make a definitive commitment.

Final Loan Approval and Conditions

Once underwriting concludes, the lender issues a “Clear to Close” notification, indicating full loan approval. This means the borrower has met the financial and property requirements established by the lender. The loan file has passed all internal reviews and is ready to proceed to the final stages.

Even with a “Clear to Close,” lenders often require the borrower to satisfy a few final conditions before closing. These are typically minor administrative items designed to ensure information remains current and accurate. Common requests include updated bank statements, latest pay stubs, a final verification of employment, or proof of homeowners insurance.

Promptly addressing these conditions is important to prevent delays in the loan process. The lender needs to review and approve all submitted documentation before scheduling closing. Delays can postpone the closing date, impacting the overall timeline for the home purchase.

The Closing Disclosure

The Closing Disclosure (CD) is provided by the lender at least three business days before the scheduled closing. This document offers a comprehensive summary of all final loan terms and costs associated with the mortgage transaction. Its purpose is to ensure transparency and allow the borrower sufficient time to review all financial details.

The Closing Disclosure outlines components that borrowers should review. These include the loan amount, final interest rate, estimated monthly payments, and a detailed breakdown of all closing costs. It also specifies the “cash to close,” which is the total funds the borrower needs to bring to the closing table.

Borrowers should compare the Closing Disclosure with the Loan Estimate received earlier in the process. Any discrepancies should be discussed with the lender or real estate agent for clarification. Understanding the Closing Disclosure is important for confirming financial obligations before signing the final loan documents.

The Closing Process

The closing process is the formal event where property ownership is transferred and loan documents are signed. This appointment typically takes place at the office of a title company or a closing attorney, depending on local practice. Attendees usually include the borrower, a representative from the title company or attorney’s office, and often the real estate agents.

During closing, the borrower will sign numerous legal documents that formalize the loan and property transfer. These include the promissory note, which is the borrower’s promise to repay the loan according to the agreed-upon terms. The mortgage or deed of trust secures the loan by placing a lien on the property, giving the lender legal recourse if the borrower defaults.

Other documents signed include various disclosures and affidavits confirming the borrower’s understanding of loan terms and legal obligations. The closing is a structured event designed to ensure all legal requirements for the sale and financing are met.

Loan Funding and Post-Closing

After all documents are signed at closing, the loan proceeds are transferred in a process known as funding. Funding refers to the lender releasing the mortgage money to the seller or their representative. The timing of this transfer can vary, with some transactions funding immediately upon signing, while others may have a short delay.

For certain loans, particularly refinances, a rescission period may apply, allowing the borrower to cancel the loan without penalty. This period typically lasts for three business days following the signing of loan documents. During this time, loan funds cannot be disbursed, ensuring the borrower has an opportunity to reconsider their decision.

Once loan funds are disbursed, the final post-closing steps involve the official recording of the transaction. The deed, which transfers property ownership, and the mortgage or deed of trust, establishing the lender’s lien, are sent to the local government recorder’s office. This recording makes the property transfer and the lender’s secured interest part of the public record, finalizing the home purchase.