Signing Your Mortgage Does Not Close the Loan

Adhesive notes on mortgage document

Signing your mortgage does not close the loan.

After my colleague’s client signed his final mortgage documents for his refinance, he eagerly went out and bought a brand new truck. Little did he know he had just stopped his loan from closing. He thought his loan was a done deal because he’d signed the final papers, but that is not the way it works.

Signing is not closing (in most states).

For a refinance, closing is four days after signing, because federal law requires you to have a three-day right to cancel before the lender is allowed to fund and close the loan.

For a purchase loan, closing is normally two days after signing, because several things have to happen to complete the process. Your original loan documents are sent back to the lender. Someone in the funding department reviews all papers to make sure they are complete. Typically, there will be items for the escrow officer and/or processor and loan officer to do. In addition, the Deed is sent to the local county recorder’s office to receive a recording number. Only then are funds disbursed and is your loan closed.

In the West, if you used a small independent escrow agent rather than a title and escrow company that handles both functions, you are in a sub-escrow situation which can delay your closing by an additional day.

Disastrous Mistakes Borrowers Made

True Stories

After signing for a refinance, a home owner dashed into work and told off her mean boss and quit. When the lender’s processor picked up the phone (as they typically do) to verify employment, she learned the borrower no longer had an income, and the loan was suddenly denied.

One eager home buyer was so excited, she went out and purchased all new appliances from Sears. As with “Mr. Eager” above, this put her debt-to-income ratio over the acceptable percentage, and her loan was promptly denied. She had to return all the appliances and provide a receipt–or she would have lost her house!

“Can They Do That?”

People think that once the contract is signed, they are set. But that is not true for mortgages. The lender can refuse to fund and close your loan if anything changes about your employment, credit, or overall risk factor.

So be wise and make no changes during your loan process–not even after you sign final papers. Have patience. Put your new loan as your priority. There will be plenty of time to get a truck, new appliances, or switch jobs later.



15 responses

  1. Can I purchase a new car after funding, or do i need to wait until the deed is recorded?

    1. The time between funding and the recording is usually a matter of hours, so it shouldn’t be an issue. But check with your loan officer, because I don’t know what state you are in or whether or not your lender does same-day funding, etc.

  2. I,ve been asked for ab an additional docs after 10 days of escrow closing and I do receive conformation of quit claim. Should I be worried about it as i do not have requested paper.

    1. I’m sorry, Izabella, but I do not understand your question.

      Are you saying that your mortgage lender is asking you for some additional documentation 10 days after your loan was closed? If so, yes, that is legal. At closing, you signed a form that says if additional information is needed, you will cooperate in providing it.

      I have no knowledge of your quit claim or what it is about. I do not know what “requested paper” means. This is not my loan and I have no knowledge of where you are located, what your loan is about, who your lender is, or anything else. Therefore, I cannot comment.

  3. Dana Wilkinson | Reply

    great info here, thkx for sharing

  4. Can i go ahead and sign an internet contract and open the utilities account after closing day?

    1. Joyce, I don’t know what you mean by “internet contract.”
      When purchasing a home, the utilities are set up to begin in your name on a certain date, which is the date of occupancy. You set it up prior to closing.

  5. My docs were signed on January 4… it’s now Feb 8 and mortgage company says my loan will not be approved because my co borrower retired from her job. Can they do this? I’ve already made my first payment and have been in the home over 30 days.

    1. Melissa, I’m not sure I understand the total situation. Are you saying that the loan funded and closed (not just signed but actually funded and closed) January 4? And then you received a welcome letter with the first statement for payment due? And after that, the loan officer called you and said the loan is no longer approved and they are going to recall the loan?

      Or are you saying you signed but the loan was never officially funded and closed?

      In what way have you been notified that the loan is no longer valid? A phone call from your loan officer? A letter in the mail? Or?

      Please give me a clearer picture, so I can give you a good answer.

  6. can a late payment reported on credit bureau after signing docs can cause loan issues? Funding is supposed to happen 24-48 hours after signing. Will they pull credit report at the time of funding after signing?

    1. Sam, theoretically, yes. Any adverse change to a loan before funding can cause the loan to be denied and not fund. However, it is very unlikely that the lender will pull a new credit report if the current credit report has not expired. Most commonly, the lender calls the employer to verify the borrower is still employed, but does not re-look at credit.

      1. Carolyn, I am in N.C. and have applied for a refi on a home that has no mortgage. Settlement statement was signed a week ago. Loan officer said our loan was only approved today yet we have to wait until Monday (3 days later) to close and by federal law 6 days later to fund. I’ve done research and I see 3 or maybe 4 days to fund after closing. If what they are saying is true, then from the time the settlement statement was signed until closing, it will take 8 days plus an additional 5-6 days for a total of 13/14 days. This far beyond the federal law timeframe and far too long being that we are refinancing on a home owner with no existing mortgage. Plus credit is excellent. This is with Amerisave. We’ve been working with them since our offer was accepted, which in all will be just about 2 months! What would cause this to take so long?

      2. Ann, you have a good question.

        Federal law requires a 3-day waiting period (not counting Sunday or Federal holidays) between signing the Closing Disclosure and signing the loan documents. In addition, with a refinance, federal law also requires another 3-day waiting period (not counting the day of signing and not counting Sunday or federal holidays) between when you sign loan documents and funding/closing the loan.
        This means if you sign final documents on a Monday, the soonest a refinance can close is Friday. (Tues., Wed., Thurs. wait days)
        If you sign on a Wednesday, the soonest a refinance can close is the following Monday (if there are no federal holidays).

        If I knew the calendar days of your CD and loan signings, then I could calculate the soonest closing day, but you can do this yourself using the info I’ve provided.
        Amerisave is a direct lender, and that is why they are so slow. They advertise all over the Internet, so they might have more customers right now then they can handle in an expeditious manner. I don’t know how long their line is for underwriting approval or for doc draw, but two months is a long wait. By contract, I as a mortgage broker (and other mortgage brokers) have wholesale lending where we can close in three weeks. Earlier this month, I had a loan go from application to final approval in 8 business days. So, speed is one advantage of using a mortgage broker over a direct lender (so you know for the future).
        I hope Amerisave has provided you with a personal loan officer who is watching your loan and pushing it through all the stages to closing. You should contact your loan officer and ask about the timeline.

  7. I’m wanting to change jobs and careers, but we’re in the middle of buying a house. What is the timeline for being able to do that after the buying process is finished? How do I know when it is safe to leave my current company without there being repercussions on the home and loan?

    1. Crystal, that is an important question, because you do not want to lose your house due to quitting your job while the loan is in progress. Even if you tell people you are intending to quit, that could jeopardize the loan closing. So you must keep this plan 100% private and to yourself. Only after the loan is fully funded and closed can you make a career change. But even then, make sure that you have enough funds on hand to make the monthly payments while you are in transition.

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