When it comes to the loan process, there is a lot that happens in a short span of time. Once approved for a loan, it can feel like a whirlwind of documentation and due dates. To make the light at the end of the tunnel a bit clearer, we’ve broken down exactly what is essential for once a borrower approaches this final steps of completing their financing, also known as the closing process:
1. Locked Loan Estimate
You may remember receiving a Loan Estimate in the early stages of the loan process. The initial Loan Estimate outlines all possible fees, and is a conservative estimate – meaning it usually reflects numbers that are a little higher than it ends up being. Once a loan is ready for closing after all the proper documentation is received, the locked loan estimate will act as a final draft. It outlines the loan terms based on the rate that the lender locked the loan. Escrow and title fees will be pretty close to the initial estimate, but more accurate now.
For a full breakdown of a Loan Estimate, Click Here.
2. Closing Disclosure
Once the locked loan estimate is signed, the lender will send out a second disclosure (also known as the Closing Disclosure). This is typically sent 24 hrs later. The borrower will then log in and electronically sign it. The Closing Disclosure is a more detailed representation of what your final numbers will look like, and is about 90-95 percent accurate. Escrow and title fees are more or less finalized, and it will give an idea of what third party fees look like (appraisal, credit report, verification of employment). If there ends up being no third party fees, these will be removed. The Closing Disclosure will also try to have an accurate estimated closing date, escrow payment, etc.
The reason the Closing Disclosure is roughly 90-95 percent accurate is because the actual signing and disbursement closing dates are unknown at this point. Interest, property taxes, first payment date – things that might change on a per day basis – are still subject to change on that initial disclosure.
3. Sign Final Loan Documents
Once the locked Loan Estimate and Closing Disclosure are signed, the final loan documents will be drawn and made available for the borrower to sign with a notary present. The final loan documents will include:
Final CD as well as several more disclosure documents
Deed of Trust – signed, notarized, and recorded with the county
Promissory Note – breaks down the mortgage loan terms
Final loan application
Borrower Authorization Certificates
Signature and Name Affidavit(s)
It’s important to note that the borrower is not legally bound to anything until the final loan documents are signed in front of a notary. Signatures on the loan estimate and closing disclosure serve as an acknowledgment, but are not binding in any way.
If you have any questions about the closing process or aren’t clear on something, please reach out to us anytime at (760) 930-0569 and we will be happy to assist in answering any questions.