Your application to refinance has been accepted. The lender’s underwriter continues to ask you for financial information which you have been providing. You have received a letter from the assigned closing attorney asking you for information and to fill out, sign and send back authorizations.
So, what is your closing attorney doing in preparation for your closing?
The first item the attorney requests is the title exam. The attorney is responsible for and tasked with the responsibility of making sure the title to your property is clean, i.e., there are no outstanding liens clouding the title to the property. If there are any title issues, you will need to coordinate with the attorney to fix them.
Another item the attorney will request is the Municipal Lien Certificate (MLC). This item is provided by the town or city in which the property is located. The certificate will provide the amount of real estate taxes due on the property, any outstanding amounts for taxes and any other amounts due to the town. The MLC also informs the lender the amounts to estimate for tax escrows for your monthly mortgage payment.
Additionally, the attorney requests a homeowner’s insurance binder which adds the new lender to the policy for its protection.
At some point, the attorney receives a “clear to close” (CTC) from the lender. That means you have officially satisfied the financial requirements of lender and the appraisal was satisfactory in relation to the loan amount. Sometimes the CTC comes not long after the attorney receives the title order, the request from the bank for title assurances and assignment to handle the closing. Since the lender told you the CTC has been issued, you may think the closing can be scheduled immediately. Unfortunately, this is not always the case.
Despite having the clear to close, the attorney must have the MLC and the title examination back with a clear title before scheduling the closing. When scheduling, the attorney also needs to be mindful of the initial closing disclosure (CD) and its time requirement. The closing disclosure contains a detailed accounting of the closing costs, your interest rate(s), your escrows, your mortgage payment and the amount you will be receiving or bringing to the closing. The initial closing disclosure must be signed three (3) days prior to the closing date. For example, if your closing date is on a Tuesday, you must sign the CD by Friday of the prior week. If you fail to sign by the three-day requirement, the closing will need to be rescheduled.
Assuming you have signed the initial CD on time, the closing will go forward. You will need to bring your driver’s license and perhaps some other information required by the lender like a recent paystub. The attorney will explain the documents and have you sign them. If you have refinanced your primary residence, there is a three (3) day rescission period where you can cancel the transaction. After the rescission period, the new mortgage is recorded and the funds are distributed and the loan becomes effective. If you are refinancing an investment property, there is no rescission period and the funds will be disbursed after same day recording.
Now you know what the closing attorney is doing, have an idea of the obstacles that can delay your closing and understand the components needed in the background to move forward with your closing.