Understanding the Funding Process
One of the most important times in a closing is when the transaction finally funds! That is the time when ownership transfers from the seller to the buyer and there is a lot that goes on behind the scenes to get funding accomplished.
WHAT HAPPENS DURING THE FUNDING PROCESS?
First, it is important to understand that working on funding only happens after all parties have signed. As a real estate agent you want to try and schedule your closings for early in the day (ideally before lunch time) if you are trying to close and fund in the same day.
After all parties sign the closing documents the title company then has to package up a portion of those executed documents and send them to the lender for review. Our closing documents then go into a review queue for the lender and the lender is checking the following items:
- Were all necessary documents signed?
- Does the signature on the documents match the signature on the initial loan application?
- Are the documents as executed acceptable to their investor guidelines?
Every lender has a slightly different process for funding review and every lender also has a different timeline for their review which can make the funding process occur very quickly or can make it take quite a while.
WHY DO I SOMETIMES HEAR FROM MY LENDER THAT WE ARE FUNDED BUT TITLE SAYS WE ARE NOT YET?
For a lender the word “funded” often means that they’ve initiated their wire for the loan proceeds. For the lender’s purposes their transaction is funded in their system. From there though there are many more steps that have to happen before the whole file is actually funded.
WHAT HAPPENS AFTER THE LENDER APPROVES FUNDING?
Once the lender has issued funding approval the fun begins. At this point the title company is looking for the loan funds to be wired into our account so that we have all funds necessary to disburse the transaction. Some lenders will send their wire in advance and just have us hold it before we disburse but many lenders will not release their funding wire until they have reviewed all of the signed documents.
Another thing that can delay funding is the buyer not sending their funds in timely. Many buyers wait until they come to closing to wire their funds which means a title company’s ability to fund quickly is arbitrarily delayed.
The title company has to wait until we have all funds from the parties (buyer, lender and sometimes even seller) before we can fund. We also have to wait until we have approval from all parties to fund.
Once all of the money is in and all approvals have been given we go to work on the funding process. This means we are doing the following items:
- Wiring out the seller proceeds;
- Wiring out any funds to a seller’s payoff lender;
- Disbursing agent commission checks;
- Paying all vendors that were shown on the Closing Disclosure;
- Packaging up the loan documents to overnight to the lender; and
- Recording the conveyance documents from the transaction.
WHAT CAN CAUSE A DELAY IN FUNDING?
There are several things that can cause a delay in funding. The most common delays are:
- Signers arrive late for closing (which pushes back the signing time, puts their file further back in the lender’s queue to review and potentially pushes them past a wire out cut off time);
- Buyers not bringing their funds to closing in a cashier’s check (or send their wire prior to closing);
- Buyers do not bring their ID with them to closing;
- Lenders waiting to wire their loan funds until after they’ve reviewed the documents;
- Lender documents containing errors that were caught in the funding review (which can require the buyer to come back in and resign the documents);
- Closings that are scheduled late in the day; and
- Issues with getting mail-out documents back on time for funding.
Working with an efficient and focused title company is the key to success when it comes to funding! Our escrow teams are experts in handling your transactions and we are here to help you get your deals closed (and funded) quickly!