Just like Underwriting everything at this stage is still happening in a sequential
fashion which means the next step can’t begin until the previous step is
complete.

We’re getting very close to closing, but there are still a few steps to complete before you’re able to go the Title company, pay your money and get your keys.

Clear to Close

After all of the conditions are met, the underwriter will issue a "clear to close".

Closing Department

The file is then sent to the Closing Department to check the file, the loan program and the property to be sure all the legal aspects have been met. Once they’ve determined the approval meets all the loan program criteria & the seller really does have the capacity to sell, then it goes to an Attorney.

Attorney

The file is also reviewed by an attorney to assure that the loan is legal and the closing documents will be binding and in good order.  The attorney will then prepare the legal documents to close. 

The attorney is usually an outside attorney located in a city near you who prepares closing documents for any number of lenders in that area.  That’s good & bad.

It’s good because it means they are familiar with the rules in that state and because they are familiar with any peculiarities of the area so things should go very smoothly.

It’s bad because sometimes that attorney can get swamped with closings from multiple sources. This is especially a problem towards the end of a month or near holidays.  (Another reason the first of the month is a better time to close than the end.)

Timeline

The process for closing can take typically 24-72 hours depending on the staffing availability in the closing department & attorney plus the number of files they are trying to close at any given time.

During a "boom" it is not uncommon to see docs taking a week to get to the closer at the title company.

YOU CANNOT SCHEDULE A CLOSING DATE OR TIME TO SIGN UNTIL THE LENDER GIVES YOU THE GO AHEAD!

Let me repeat that -

YOU CANNOT SCHEDULE A CLOSING DATE OR TIME TO SIGN
UNTIL THE LENDER GIVES YOU THE GO AHEAD!

We find Realtors & Builders wanting to schedule a closing date & time without even knowing what stage you are in the loan process.  They say it’s puts pressure on everyone to speed things up, but actually it slows things down.

Multiple people now have to take time away from working on your file to deal with this and call everyone and explain why it can’t happen.  It also makes it harder on other people who really can close because the Title company has a closing schedule that’s now clogged up with people who can’t close. It also tends to make the buyers mad and taints what should be a very festive atmosphere.

So if you are a Realtor or Builder and are having trouble scheduling a closing time your buyer likes, that’s probably why.  STAY OUT OF IT!  It’s not your job.  If the Buyer & Seller will tell the lender and title company your needs they will work very hard to meet them, but a lot has to happen to get them to that stage.

I know it’s nerve wracking not to be able to schedule, but because there are so many different people involved at these last stages, there is simply no way to plan until you’ve been given a Clear to Close.  And as you can see, even then, time frames to complete the rest of the work are not absolutes.

By the way, there’s a reason most closings are scheduled for the afternoon and not in the morning. 

1. 1)It’s the banking system.  No matter what time we start the wire process to fund your loan, it seems that the wire doesn’t come out on the other end until 2:00-4:00 p.m. 95% of the time. 
   Regardless of when you sign, it ain’t closed till the money is ready to change hands. In other words, the seller isn’t going to give you the key till they have their money which is usually 2:00-4:00.
   

2. 2)The title companies typically devote the morning time to working up closing statements and getting the docs ready for the afternoon closings.
   

3. 3)To get your docs ready for a morning closing the Title Company would have had to do all the work the previous day.  That means you are delaying your closing.  Because if they had everything ready the day before you could have closed the day before!
   

Instructions to the Title Company

The attorney prepares most of the closing documents the title company will use to close the loan with the buyer and seller. 

Typically before they send out the closing documents, they will fax instructions to the title company & to us so the closer can begin preparing the Closing Disclosure and so we can look for mistakes. This is the first time in the whole process that someone can say definitively when you can close.  Up until this time everyone is guessing.

The title company also has their own attorney to draw the docs for the forms they add.

Review the preliminary CLOSING DISCLOSURE (CD) (closing fee sheet)

After the title company receives the closing instructions from the lender, they will begin preparing the CLOSING DISCLOSURE settlement statement that will be used to disclose all of the fees at closing. The title company gathers all the bills and pays them for you out of the funds you bring to the closing table.

There are often several versions of the CLOSING DISCLOSURE as there are often corrections to be made. After closing there is no way to go back and add in a missing fee so everyone is scrutinizing the CD with an eagle eye.  Remember we said earlier that Congress now says this CD has to be in your hands 3 business days before closing which is delaying your closing. Are you beginning to see why I said you might begin to view that new requirement as a curse rather than a blessing.  There are literally 100 things that might have to be changed to get an accurate CD and any one of them can delay closing because of the 3 business day requirement. 

What to Expect at Closing

Buyers and sellers sometimes find the closing process overwhelming because there’s a LOT of documents to sign!  Bring a tube of Ben-Gay for your hand.  Also remember to bring a picture ID as they have to ascertain your identity before they allow you to sign and notarize all the docs.

The buyer or seller will have to appear at the title company for a meeting in which all of the final legal details will be handled, this is colloquially known as the closing.  But in reality it is only the SIGNING.  The real closing is when the money has arrived and the title company can transfer ownership of the property. Usually the Buyer Signs first and the Seller second. (hence the afternoon closings) See the Funding section below for why it happens that way.

Others in attendance might be the Realtor, Lender, Builder and the Title Company’s closing agent. The closing typically takes an hour to an hour and a half.  In Texas the meeting will usually occur either at the title company who is insuring the loan or an attorney's office, but it can happen anywhere there is a notary available. Unlike most lenders, we are notaries so we’ve even gone to hospitals to help people close . . . Wait! I mean SIGN.

The main emphasis is to review all of the paper work, and to sign all the many forms for financing, and to transfer title to the new owner. For the Buyer and Seller, knowing what to expect can ease concerns on the process of closing.

Typically the buyer will have the largest role to play in the process of closing on a house because they have to sign all the loan documents in addition to the transfer of title forms.

However, the seller will have an important role to play too. The Seller will sign a General Warranty Deed.  This is typically sent by the lender’s attorney, but sometimes prepared by the Title Company's Attorney which transfers the ownership interest in the property to the buyer upon closing and funding of the loan. This is one of many documents recorded at the courthouse.

First, you'll review & sign the loan documents. The loan docs are the bulk of their paper work, but there will also be:

• Closing Disclosure statement that you will have received at least 3 days prior to closing (showing all your closing costs)

• Mortgage Note

• Deed of Trust

The mortgage note and other assigned specifications will spell out in specifics terms such as how and where the note is to be paid, and the institution’s right to reclaim their rights to the property. In other words the procedures that constitute a default and what they have to do to foreclose on the property.

This legal documentation will also explain that you must meet other specific requirements, such as paying insurance & taxes yearly. That is of course if you are allowed to pay your taxes & insurance independently and they are not part of an escrow account (monthly payment).  Most people choose to have an escrow account and to have the servicer of the loan pay those bills for you when they come due.

All parties must be in complete agreement over terms and sign all documentation. Once this phase is completed the buyer will present a certified check, not a personal check, for the entire remaining amount of the down payment & closing costs. You will be given credit for everything you’ve paid up front like earnest money, credit reports, and appraisals.

(Note: if you have agreed to pay more than the house is worth and you are paying above appraisal price you will have all your normal down payment, closing & prepaid costs PLUS you will have to pay the difference between the appraisal and the sales price.  There is no way to finance this!)

Texas insurance laws allow you to pay with a personal check for up to $1,500, but anything above that must be made out in a Cashiers Check, Cash or Money Order. Since title companies are not set up to handle large sums of money they would rather you paid with a Cashiers Check.

Technically you could pay the full amount by personal check but your loan wouldn’t be closed until your check had cleared the bank and the money was in the title company’s bank account.  Think 2 weeks later.

Funding Schedule for Purchases

Usually the loan funds are wired to the title company when the docs are sent, unless the closing will be for a future date. After all the funding conditions are met, the lender will usually request the title company to send back a small list of documents to get "funding approval" which is called a "funding number" from the closer at the lender.

This is usually something that happens within 20-30 minutes, however if the closing is late in the day (after about 6:00), there may not be anyone available at the lender to review the documents and issue the funding number so the title company would not be able to release funds until the next business day.

Funding Schedule for Refinances

Refinances of a homestead have an automatic 3 day right of rescission. They don’t count the day you Signed and it funds on the 4th day.

See why it’s better to call it a Signing and not a Closing.

Once everything has been completed and the loan has been funded, the Buyer will be presented the keys to their new home and they are free to move in!