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The Mortgage Closing Process

Mortgage closing is the final step in the loan origination process in which the borrower signs the loan documents, the lender disburses funds, title transfers (in a purchase), and the mortgage lien is recorded in the public land records. The process is governed by TRID, RESPA, and state-specific laws, and involves coordination among the borrower, lender, settlement agent, and other parties.

Key Takeaways

  • Closing is the event at which the borrower signs the promissory note and deed of trust or mortgage, creating legally binding loan obligations and a lien on the property.
  • The borrower must deliver cash to close by certified funds (cashier's check or wire transfer). Personal checks are generally not accepted for large amounts.
  • Wire fraud targeting closing funds is a significant risk. Borrowers should independently verify wiring instructions by phone using a trusted number, never relying solely on email.
  • Table funding (same-day disbursement) is common in most states. Some states require post-closing funding, which creates a delay between signing and disbursement.
  • Documents are recorded with the county recorder's office to establish lien priority and provide public notice of the ownership transfer and mortgage encumbrance.
  • The first mortgage payment is typically due on the first day of the second month following closing, because prepaid interest covers the partial month of closing.
  • Under RESPA, the lender must provide notice if loan servicing is transferred to a different servicer, and the borrower is protected from late fees during the 60-day transfer period.
  • Borrowers should complete a final walk-through within 24 to 48 hours before closing to verify the property condition and completion of negotiated repairs.

How It Works

Pre-Closing Document Preparation

Once the underwriter issues a clear to close, the lender’s closing department prepares the loan document package. This package typically includes the promissory note, deed of trust or mortgage, Closing Disclosure, right of rescission notice (for refinance transactions), IRS Form 4506-C (authorizing the lender to obtain tax transcripts), compliance agreement, name affidavit, occupancy certification, and any rider documents (such as a planned unit development rider, adjustable-rate rider, or condominium rider). The package is sent to the settlement agent, who adds the deed, title-related documents, and state-required disclosures.

The settlement agent also prepares the settlement statement, coordinates payoff demands from existing lienholders (in purchase transactions where the seller has an existing mortgage, and in refinance transactions), orders updated title searches, and arranges for the recording of documents after closing. This preparation typically takes two to four business days after the lender issues the closing package.

The Signing Process

At the closing appointment, the settlement agent presents the documents in a specific order. The Closing Disclosure is reviewed first so the borrower can confirm the financial terms before proceeding. The promissory note is signed next, establishing the borrower’s repayment obligation. The deed of trust or mortgage is signed and notarized, creating the lien on the property. Federal and state disclosures are signed in sequence, followed by any ancillary documents.

Each document requiring a signature must be signed exactly as the borrower’s name appears on the document. Notarized documents require the borrower to present valid government-issued identification. The notary verifies the borrower’s identity, confirms that the borrower is signing voluntarily, and applies the notary seal. Any discrepancies in name spelling, missing initials, or unsigned pages will require correction before the lender authorizes funding.

For refinance transactions, federal law provides the borrower with a three-business-day right of rescission after signing. During this period, the borrower can cancel the transaction without penalty. The lender cannot disburse funds until the rescission period has expired. This right does not apply to purchase transactions .

Funding and Disbursement Sequence

After the closing documents are signed and reviewed, the lender authorizes funding. In a table-funded closing, the settlement agent has already received the loan proceeds via wire transfer from the lender and disburses the funds at the closing table. The settlement agent pays off existing liens, distributes commissions and fees, and delivers net proceeds to the seller (purchase) or borrower (cash-out refinance).

In a post-closing-funded transaction, the signed documents are returned to the lender for review. Once the lender confirms that all documents are properly executed, the lender wires the loan proceeds to the settlement agent, who then completes the disbursements. This process can take one to three business days after signing.

The deed and deed of trust are submitted to the county recorder’s office for recording. The settlement agent typically handles recording on the day of closing or the following business day. The original recorded documents are eventually returned to the appropriate parties: the deed to the borrower (or held by the lender in some states), and the deed of trust to the lender. Title insurance policies are issued after recording is confirmed.

Post-Closing Review

After closing, the lender’s post-closing department reviews the entire loan file for compliance and completeness. This review includes verifying that all documents are properly signed and dated, that the Closing Disclosure matches the loan terms, that recording was completed, and that the title insurance policy was issued. If any deficiencies are identified, the settlement agent or borrower may be contacted for corrective documents. Post-closing issues are common but are typically resolved without affecting the borrower’s loan terms.

Related topics include your loan estimate, closing disclosure explained, mortgage timeline: how long does it take?, and to choose the right mortgage lender.

Key Factors

Factors relevant to The Mortgage Closing Process
Factor Description Typical Range
Clear to Close Timing
Funding Method (Table vs. Post-Closing)
Recording Priority
Right of Rescission (Refinances Only)

Examples

Scenario: Purchase transaction with table funding proceeds smoothly.
Outcome: The transaction closes on schedule with no delays. The seller receives net proceeds the same day. The borrower takes possession after recording. The first mortgage payment is due on the first of the second month following closing.

Scenario: Borrower falls victim to a wire fraud attempt during the closing process.
Outcome: The borrower contacts the bank immediately to attempt a wire recall. The bank initiates a recall request, but the fraudulent account has already been drained. The closing is delayed while the borrower arranges alternative funds. The borrower files a report with the FBI's Internet Crime Complaint Center. Recovery of the funds is uncertain. The borrower could have prevented this by verifying wiring instructions through a phone call to the settlement agent at a known phone number.

Scenario: Refinance closing with right of rescission creates a funding delay.
Outcome: The existing mortgage payoff does not occur until Monday, meaning the per-diem interest on the old loan continues accruing through Friday. The borrower pays approximately $45 per day in additional interest on the existing loan during the rescission period . This delay is inherent to refinance transactions and cannot be avoided.

Common Mistakes to Avoid

  • Wiring closing funds based on email instructions without independent phone verification
  • Skipping the final walk-through inspection before closing
  • Bringing a personal check instead of certified funds to closing
  • Making large purchases or opening new credit accounts between clear to close and closing
  • Not confirming the first payment due date and loan servicer information at closing
  • Rushing through the document signing without reading key terms

Documents You May Need

  • Government-issued photo identification (driver's license or passport)
  • Cashier's check or wire transfer confirmation for cash to close amount
  • Proof of homeowners insurance (declaration page with lender listed as mortgagee)
  • Closing Disclosure (reviewed and compared to Loan Estimate prior to closing)
  • Purchase contract and any amendments (for verification at closing)
  • Power of attorney (if applicable, pre-approved by the lender)
  • Certified funds receipt or wire transfer confirmation from the sending bank
  • Final walk-through completion confirmation

Frequently Asked Questions

How long does the closing appointment take?
A typical closing appointment takes 45 minutes to two hours, depending on the complexity of the transaction, the number of documents, and how many questions the borrower has. Purchase transactions generally involve more documents than refinances. Borrowers should plan for at least 90 minutes and should not schedule other commitments immediately after the appointment.
When do I get the keys to the property?
In most purchase transactions, the borrower receives the keys after the loan funds and the deed is recorded with the county recorder. In table-funded states, this typically occurs on the day of closing, often within a few hours of signing. In post-closing-funded states, key delivery may be delayed by one to three business days. The purchase contract should specify when possession transfers.
What is the difference between closing and consummation?
In most contexts, the terms are used interchangeably. Technically, consummation is the moment the borrower becomes contractually obligated on the loan, which is typically when the promissory note is signed. TRID uses the term consummation for purposes of the three-day CD delivery requirement. Closing or settlement refers to the broader event including document signing, funding, and recording.
Can I close on a mortgage remotely?
Remote online notarization (RON) is permitted in many states and allows borrowers to sign closing documents electronically via a video conference with a notary. Availability depends on state law, lender acceptance, and county recorder acceptance of electronically notarized documents. Not all lenders or settlement agents offer remote closing. Borrowers should inquire early in the process if remote closing is preferred .
What happens if the closing is delayed?
Delays can result from unresolved underwriting conditions, document errors, title issues, appraisal disputes, or changes that trigger a new three-day CD waiting period. Consequences of delay include rate lock expirations (which may require a lock extension at additional cost), breach of the purchase contract if the closing date passes without an extension agreement, and additional per-diem interest costs.
Do I need to bring anything to closing besides identification and funds?
In addition to government-issued photo ID and certified funds, borrowers should bring the Closing Disclosure for reference, proof of homeowners insurance if not already provided to the lender, and any documentation the settlement agent has requested. If signing under a power of attorney, the original POA document must be presented. Contact the settlement agent in advance to confirm what is needed.
What is the right of rescission?
The right of rescission is a federal protection that gives borrowers in refinance transactions three business days after signing to cancel the loan without penalty. During this period, the lender cannot disburse funds. The right of rescission does not apply to purchase transactions. The rescission period begins the day after signing, and business days exclude Sundays and federal holidays.
Who pays the closing costs?
Closing costs are divided between the buyer and seller as specified in the purchase contract and governed by local custom. Buyers typically pay loan-related fees (origination, appraisal, credit report), prepaid items (interest, taxes, insurance), and lender's title insurance. Sellers typically pay real estate commissions, transfer taxes, and owner's title insurance (customs vary by state). Seller concessions can shift some buyer costs to the seller within program limits.
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