What Happens During the Loan Closing Process–In Lay Terms

by Bevin Bermingham on May 20, 2013

One of my clients asked me recently to explain what we had to do once the contract was closed… really. I call this part of the process the “back burner” because there is a lot of waiting involved. Waiting for your loan to be approved by the lender, both you as a borrower and the property under contract as collateral. It’s also a waiting process for the title report to be returned from the title company, telling us what liens need to be cleared by the seller in order to convey “clean” title. (For example, outstanding mortgages or environmental control board liens would need to be resolved before we could close.)

Here is the list I provided to my client about how the mortgage process works, roughly, from when the signed contract is submitted to the lender to closing.

Submit initial application with contract of sale.

Order appraisal.

Your loan rep/mortgage broker asks you for lots of documents to prove your income and rental history.

Underwriting reviews your application, the appraisal and any other documents relating to the condo/coop they ask for (sometimes offering plan, budget, etc…).

They ask for more documents (they always ask for more).

They issue a mortgage commitment. If you are denied a mortgage commitment, this is what triggers the contingency clause in the contract of sale.

Whatever contingencies are asked for as part of the commitment (sometimes it’s even more documents, or updated versions of documents you’ve already given) need to be satisfied. Occasionally even the appraisal needs to be submitted.

Then the loan is “clear to close.” Once we have a clear to close, then we schedule the closing. Sometimes, this is a week or two before we are closing. Most of the time this is the same week or even a couple of days before we want to close. (And sometimes we delay the closing because we’re waiting for the clear to close.)

As for things you should be doing, make sure you keep the ball in your loan rep/mortgage broker’s court at all times as much as possible–when they ask for a document get it to them as quickly as you can.

In the meantime I am ordering the title report and waiting for the mortgage commitment. Once title comes in I’ll review it, find out from the seller how they will address any blemishes on title (things they will need to pay or resolve prior to closing).

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