Several things happen during escrow closing, here’s a little guide for the first time (or more likely “rusty” borrower).
1) During a purchase, the Purchase Agreement may provide the buyer with the opportunity to tour the property (Final Condition Check) where a final inspection of the buildings is completed (sometimes for repairs agreed upon prior to closing). The timing of this is typically within five days prior to the COE.
2) The Lender will send the Loan Documents to the Title Company. The Custody Officer will prepare these and other documents for his signature.
3) In commercial transactions, borrowers may meet with the broker at a specified location, or an escrow will send a traveling notary to a location of the borrower’s choosing to sign closing documents. In most cases, an escrow officer will accompany the notary to guide the borrower through the Loan Documents, explaining the purpose of each document. (Here is a list of loan documents that include various ways title can be awarded.) In most cases, a borrower will receive a draft Settlement Statement for review prior to closing to make adjustments. At the time of signing, a final “Settlement Statement” detailing the various closing costs (title company fees, bank charges, broker fees, etc.) and credits (your deposit, your loan, etc. .) will be part of the loan documents. needed to be signed. The second is the “Promissory Note”, which shows the interest rate and other terms of your loan. The other loan documents are often boilerplate, through the lender you are working with. In some cases, an attorney can review these documents, but most lenders do not allow changes to these documents, so they are non-negotiable. It is important that you bring a photo ID as some of the documents will need to be notarized. The lender also requires that you sign his name exactly as it is written below the signature line. No funds required at signing. If there is a “gap” in the purchase price vs. loan amount + closing costs shown on the Settlement Statement, which requires the borrower to bring cash to close (Good Funds), will be collected in the following days by Title.
4) After the loan documents have been signed, the Escrow Officer will prepare the paperwork and send it back to the Lender. The lender then reviews the loan documents (which can take up to three days). When the lender has approved the loan documents, he notifies the Title Company that he is ready to finance (transfer your loan proceeds to the Title Company). Lender financing occurs the business day prior to escrow closing. Title will request that any cash required by the borrower be sent to Escrow on or before this day. Keep in mind that, as the borrower, you are responsible for interest payments beginning on the day the lender’s funds are transferred into escrow.
5) On Escrow Closing day, the Title Company will send a representative to the County Recorder’s Office to record a Deed showing transfer of title (either to a new owner in a purchase) and/or record the Deed of Trust for the new loan. Each recording generates a “serial number” from the County Recorder’s Office. After recording all deeds for the day, the Title Company representative faxes the list of serial numbers to the Title Company, confirming the recordings. Once the Deed has been recorded, the transfer is complete. In a purchase, the transfer of all utilities, bills, etc. is usually completed at this time also under the provisions of the Purchase Agreement.
Day 1: Loan Documents arrive at the Title Company. You sign and the Documents are returned to the Lender via an overnight delivery service.
Day 2: The Lender receives the Documents and begins the review process.
Day 3: The review process is complete and the Lender notifies the Title Company that they will transfer the loan proceeds the following day.
Day 4: The Lender transfers the loan proceeds to the Title Company.
Day 5: The title change is recorded with the County Recorder. The trust is closed.