Once your home loan is approved, the underwriter will inform you that the loan is approved, however, based on a few conditions. It's important to understand that this approval will eventually expire, along with your rate lock, so you want to get moving to satisfy all of the conditions listed. Conditions fall into two categories: “prior to documents” conditions and “prior to funding” conditions.
Some loan conditions are standard, and then some may be more specific to your loan. A few examples of standard loan conditions include proof of mortgage insurance, a title commitment, a clear title report, appraisal must exceed a certain value, termite inspection, etc.
“Prior to docs” or “Prior to documents” conditions
These conditions are usually the most important, as they are created because the underwriter must make sure that you, the borrower, qualify for the loan. Therefore the underwriter may require more income documentation, verification of employment, rents, deposits, as well as appraisal and title commitment. The underwriter will let your loan officer know what documents are needed to meet these conditions and your loan officer will work with you to get these documents together. The loan documents cannot be ordered until these conditions are satisfied.
“Prior to funding” conditions
These are documents that must be delivered to the underwriter before the funds are issued. Typically these are conditions that the underwriter believes will be easy for the borrower to meet, thus they are not required to order the loan documents. They tend to be reserved for procedural matters and are taken care of by the escrow officer and loan funder.
Ordering, Delivering and Signing the Loan Documents
Once your loan officer gathers all of the needed items to satisfy the “prior to docs” conditions, the loan processor will organize and submit the documentation to the underwriter, and the underwriter will sign off that these conditions have been satisfied (may take a few hours to a few days). Now either the loan officer or processor can order the loan documents!
The loan documents will be reviewed by the lender and then delivered to the escrow officer. From there the escrow officer will do their part to put the loan documents in their final form, adding information such as payoffs, taxes and prepaid interest due, etc.
Signing Your Docs
Once the escrow officer has put the loan documents in their final form, they will reach out to you and the seller to arrange signing appointments. This appointment is the “closing” of your loan. However, as you know now, once you sign, your loan is not closed as the “prior to funding” conditions must still be satisfied for funds to be issued.
Often lenders will send the documents directly to you through a mobile notary, this makes it easier for all parties to sign the documents quickly.
At your closing appointment you will also receive the HUD-1 statement, which will show all of the costs associated with the loan. You have the right to request the HUD-1 statement before closing so you can review it and compare it against the Good Faith Estimate (GFE).
After you, the buyer, sign the documents, the escrow officer will send them back to the lender along with the “prior to funding” conditions such as proof of insurance.
Funding Your Loan
The lender will receive the documents and forward them to the funding department. As long as all checks out, ie all of the documents are signed correctly and the underwriter signs off on the “prior to funding” conditions, the funder department will wire the funds to the escrow company and your loan is complete! Keep in mind that this can take up to a few days; find out from your loan officer how long it will take as it must fund on the day that is specified in the home purchase contract.
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