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Alan Morris' Blog

By Alan Morris | Mortgage Broker
or Lender in Raleigh, NC

Know the mortgage lingo before closing

What are they talking about?

Many borrowers go through the closing process in a haze, nodding, smiling, and signing through a bunch of noise that sounds like a different language.

Even though you may have put your trust in your real estate and mortgage team it helps to understand some of the terminology so that you can pay attention to specific details that may impact the decisions you need to make.

Common Closing Terms / Processes:

1. Docs Sent –

Buyers sit on pins and needles through the approval process, waiting to find out if they meet the lender’s guideline requirements (which include items such as total debt to income ratio (DTI), maximum loan amounts, loan to value (LTV), credit,  etc.

The term “docs sent” generally means you made it!! The lender’s closing department has sent the approved loan paperwork to the closing agent, which is usually an attorney or title company.

Keep in mind that there may be some prior to funding (PTF) conditions the underwriter will need to verify before the deal can be considered Final Approved.

2. Docs Signed –

Just what it implies.  All the proper documentation is signed, including the paperwork between the borrower and the lender which details the terms of the loan, and the contracts between the seller and buyer of the property.

This usually occurs at closing in the presence of the attorney or escrow officer in North Carolina, buyer and seller, or their respective agents.  Many times the Mortgage Consultant or Loan Officer will attend as well.

3. Funded –

Show me the money!

The actual funds are transferred from the lender to the escrow company, along with all applicable disclosures.

For a Home Purchase, if the closing occurs in the morning, the funds are generally sent the same day. If the closing occurs in the afternoon, the funds are usually transferred the next day.

The timing is different for Refinance transactions due to the right of rescission. This is the right (given automatically by law to the borrower) to back out of the transaction within three days of signing the loan documents. As a result, funds are not transferred until after the rescission period, and are generally received on the fourth day after the paperwork is signed.

(Note – Saturdays are counted in the three day period, while Sundays are not). The right of rescission only applies to a property the borrower will live in as a primary residence, not investment properties.

4. Recorded –

Let’s make it official. The recording of the deed transfers title (legal ownership) of the property to the buyer. The title company or the attorney records the transaction in the county registrar where the property is located, usually the same day as funding.

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There you have it – an official translation of closing lingo.

As with any other important financial transaction, there are many steps, some of which are dictated by law, which must be followed.

 
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