What Happens in Escrow After Loan Documents Are Signed?

Closing escrow on your new home is an exciting time – to say the least! So, it’s no surprise that home buyers and sellers get anxious as the closing day nears.

One big milestone in the process is when the loan documents are received by escrow, since it’s one step closer to the transition of property to the home buyer.

There are a few misconceptions about this milestone though. Often, people think the closing date occurs immediately after the loan documents are signs. But, this isn’t always the case.

Specific things must happen before closing can occur. The escrow company must do some verification, and depending on the lender; the funding process may take several days after the signing of documents takes place.

To help you gain a better understanding of this phase of escrow, we wanted to share some of the important steps that the escrow company must complete. We hope that this information provides you with a better understanding so that you prepared for this phase.

  1. Upon the loan being approved, and prior to loan document conditions being received and approved by the Lender, the Lender prepares the loan document and sends them to escrow for signing.
  2. Escrow reviews these documents to comply with the Lender’s requirements. They also review the file for any outstanding conditions
  3. Escrow prepares the buyer’s estimated HUD1/closing statement and collects any required paperwork that requires the buyer’s signature. Escrow then makes arrangements for signatures on these papers. 
  4. Escrow prepares the seller’s estimated HUD1/closing statement and collects any required paperwork needing seller signature. Escrow then makes arrangements for signatures on these papers.
  5. There are some instances when the Lender might possess documents also require signatures from the listing agent, selling agent or loan agent. If that’s the case, escrow makes arrangements for these items to be signed.
  6. If still pending, escrow orders insurance, closing protection letter and anything else required by the lender.
  7. When the buyer’s loan documents have been signed and/or given back to escrow, escrow then packages these documents to be returned to the funding Lender.
    • This is referred to as the loan package. Ideally, by this time, any documents that required signatures from any party involved in the transaction have been signed and returned to escrow to include in this package.
    • Lenders all work differently. Some might prepared to fund the loan when they receive the loan package, while others may require 24-72 hours after the loan package is received to review the package prior to advise if there are any additional requirements/conditions to fund the loan (this is the most common scenario we run across on the West coast).
    • Buyers are advised to understand the time frame associated with funding the loan from the lender that they are working with. This time frame is something that escrow does not control.
  8. At this point, the escrow company will request funds from the lender.
  • An important note: Although the loan package has been completed and received by the lender, there may be other issues/conditions related to the transaction (for example, outstanding termite repairs) that will hold up the request of loan funding from escrow.
  • Essentially, the escrow company has to be in a position to close escrow. This means that all conditions of the escrow have been met and all of the closing funds from the buyer have been received.

As we mentioned, there is more to getting escrow completely closed than just signing loan documents, which is why it’s critical to get conditions cleared with your loan officer in an efficient manner.

Also, it’s important to remember, that all loan documents are time-sensitive and that all Lenders have a different process. It is important to reiterate that all loan documents are time sensitive and all Lender works differently.

If you have any questions about this topic, any other escrow topic or would like to learn more about how we can support your escrow needs, please don’t hesitate to contact us. We are here to help you!