Understanding the terminology of “loan docs”

signing-docsBack in February of 2006 I took the time to type out an outline of everything that happens with a real estate transaction, and color coded it to reflect who does what. I called it Anatomy of a Real Estate Transaction, and I did it backwards from the end to the beginning. Many have found it helpful, but it may be time to re-write it, though I don’t think much has changed since then as to how an escrow starts and ends.

Recently with loan processing becoming a bit more difficult than it was back in 2006, I have noticed a lot of confusion regarding the terminology used by lenders and agents and escrow at the end of the transaction.  In the 2006 post I said:

***This one little line is THE MOST IMPORTANT PART OF ANY REAL ESTATE TRANSACTION INVOLVING FINANCING!  And yet, I purposely put it there as quietly as it happens, no fanfare, no bold lettering, no all caps, to notice to all parties.  “Docs are in” – A quiet little event between the lender and escrow that is clearly THE BE-ALL-END-ALL OF EVERYTHING!*** 

There are actually three things that happen at the end of a real estate transaction where the buyer is using a mortgage to purchase.

1) Docs are ORDERED

2) Docs are SENT

3) Docs are IN

This is the nail biting stage of every real estate transacton. 

Often the confusion regarding the last word in those three stages creates many phone calls back and forth due to a misunderstanding of the terminology.  This happens often enough that I thought it would be helpful to those buying and selling homes to highlight the distinction in a separate blog post.

Often the buyer will say “lender said the loan documents are at escrow” when what the lender really said was the loan documents have been ordered.  Sometimes the lender says the loan documents have been sent, which is not quite the same as their being in escrow.

If you are buying a home you want to make sure your lender is instructed to notify you TWICE. 

You want to be notified when the docs have been ORDERED, as that pretty much means your loan is really fully approved and out of underwriting.  It also tells you that you likely are pretty much “done” and on your way to closing.  It also tells you to start preparing to go and sign your closing documents, as most escrow companies will not sechedule a signing appointment until they receive the loan documents.

You also want to be notified by the lender when the loan documents are SENT, especially if you need a little advance time to clean up your desk, or give your boss a little notice that you will likely be leaving work to go sign your closing papers. The closer the loan documents are ordered to the actual closing date, the less time you will have to give your boss notice that you need a little time off or a longer lunch to sign your closing papers.  These two cues: Docs have been ordered and Docs have been sent, can be pretty important if you can’t just jump up and leave work without notice.

Unlike states that don’t have escrow, where people have 30 days or more notice as to what day they need to take off from work to go and sign their papers, escrow states require that the buyer sign at least a day before closing. In WA and CA, closing is a phone call, often between 4 and 5 p.m., so taking off from work “on closing day” is not usually needed.  In fact, if you do take off on closing day, be prepared to be sitting around staring at the wall waiting for a phone call before you can get the keys and start moving  into the house.

I am currently waiting for “docs” on two closings.  In one “docs have been ordered”, on the other “docs have been sent” on neither have docs made it to escrow.  As the agent, I wait impatiently for docs to be IN so I can review the closing numbers for my clients.  One is a seller, so those numbers are not loan document sensitive and final numbers have already been reviewed and corrected at my end, and the seller has already signed their closing papers. 

On the other, I can’t review the final numbers for my buyer client until the loan docs are IN, as escrow prepares the Buyer Closing Statement after receiving those loan documents.  We are pretty sure what the numbers should be…but given the documents are “late”, I vigilantly watch my email and phone so I can review the numbers immediately.  I don’t want to be part of  the delay on a closing, by not being available to review the final numbers within 15 minutes of receiving them.

“docs have been ordered” is the breathe a little easier cue.  That usually converts IF it will close to WHEN it will close. So asking your lender to notify you when docs have been ordered, is a very good idea.

40 thoughts on “Understanding the terminology of “loan docs”

  1. P.S. Docs are IN! Waiting for numbers…

    People sometimes ask me how I have so much time to blog. First of all, it doesn’t take me very long to write a blog post. Secondly, writing a blog post sometimes keeps me from biting my nails or eating something fattening while waiting for docs to come in 🙂

  2. Numbers just came in for review. The time lapse between comment #1 and comment #2 should give you an idea of how long it takes from “docs are IN” to Buyer Closing numbers ready for review.

  3. You nailed it! And it confusion about these very differences that causes alot of angst for everyone in the home stretch.

    The event of the lender ordering docs or even sending docs does not necessarily mean escrow will receive the documents in two minutes, or two hours or even two days.

    It’s frustrating to be in escrow sometimes and having a disgruntled buyer, seller or agent who thinks escrow has the documents and, somehow, just doesn’t want to acknowledge it.

  4. Thank you, Nancy.

    I will note here that the one hour timeframe between comments one and two is likely the shortest time it can take from “docs IN” to “numbers ready for review”. At the end of the month, that timeframe may not be as reasonable. Most often Docs Ordered to Docs In takes a couple of days and up to 3 business days, but last week I had a same day turn around from docs ordered to docs in. It was clearly the fastest turn around from docs ordered I had ever seen.

    I think it was because it was a “House Key” program loan, and the wait at the end was only for the MCC certificate. Also it was one of those weeks when the County was going to be closed on Friday, making everyone want to sign and close by Thursday. Luckily it wasn’t the end of the month. Oh, and it was also the week before Easter and people who had off from work that week didn’t want to hear they would be closing on Monday vs. Thursday.

    It reminded me of the day I had my daughter Jackie and the lobby was filled with Mom’s wanting to be induced. It was March 31st and apparently no one wanted an April Fool’s baby 🙂

    I once wrote a post about an escrow being like the three tri-mesters of a pregnancy. Phase one is so intense and disruptive it can make you nauseous. Phase two is pretty calm and sometimes so calm you wonder if everything is OK. Phase three at the end can be very easy or very hard….no way to tell on day one of Phase one, which way the “end labor” is going to go.

  5. Ardell, with our company docs are not ordered since it’s my processor who draws my docs. It’s simply “docs are in”. Part of the confusion is that different types of lenders have different abilities or are set up differently to process the transaction. I don’t dare assume that every correpondent lender does business the same way we do. A mortgage broker would have to order docs and a bank or lender where docs are not drawn on-site I guess would have to “order docs” too.

    Our loan docs are sent via secure electronic transfer… a few years ago, we would “send” paper documents via courier. Now it’s all push button to the escrow company. We need to confirm they’ve received them and they need to print them for the client.

    I do advise clients when we have “delivered” docs to the escrow company. 🙂

    Another issue is when LO’s tell the parties involved that escrow has docs when they don’t. I’m sure Tim and Lynlee could share plenty of stories about that. The buyer or agent calls escrow wondering what’s taking them so long when they’ve yet to receive the docs…yet the LO will make it look like they’ve been sitting on them for days (or at least hours).

  6. Ardell, thank you for your thoughts – I appreciate how clear your post was and how active you are in the comments. I’d like to confirm that this analysis is for physical documents, and I’m wondering how would electronic documents change the timing other than speeding up the process? Thank you for your insight!

  7. Thank you so much for this blog. I was worrying that my loan may be still unapproved but reading this helped to understand it is a matter of “when” I get the final papers.

  8. Hi Sherry,

    You should ask your lender. It’s a pretty easy question to ask and answer as to whether or not you have been approved. If you are in that short period after underwriting and waiting for docs, some lenders just take longer than others.

  9. all these comments are useful,but i still have not the answer im looking for,our loan was approved on Monday,we still have not received the final loan docs that we have to sign and get notarized,my question is after loan is approved and everything is sent to the bank that needs to be sent,how long are you suppose to wait to get those final doc from the bank??? we have already signed and sent back the disclosure papers and my loan officer has submitted all paperwork,what is the delay ,we should of got these loan docs by now right???

    • marian, it depends on what type of lender you’re working with. If it’s a mortgage broker, they’re dependant on the lender. If it’s a mega-bank, it may be coming from a processing center and a correspondent lender can draw their own docs but the set-ups/time frames may vary.

      What is your mortgage originator telling you?

  10. Two things you didn’t mention that are very important:

    1) the appraisal?

    2) close date?

    Loan documents expire in X days (not all are the same) so if everything is “done”, including the appraisal, but closing is two weeks away, it’s a little early for loan docs to come in. Most often it is within 5 days of closing even if they “finish” all approvals earlier than that.

    The “standard” time frame for docs is 72 hours, though some lenders have “in-house” ability to produce loan docs, and I have seen those happen as quickly as one hour “when needed”.

    That’s for a “purchase loan” vs. a refinance.

  11. Marian,

    From an escrow perspective, when loan doc’s arrive and when they are promised are two different things.

    The receipt of your loan documents to escrow from your lender depends solely on your loan officer and lenders transaction management.

    I would (and it sounds like you are) be in contact with your loan officer and put pressure on them to get the real scoop.

    Best Wishes.

  12. Tim,

    A lot of my clients have their loan approved within 3 days of offer acceptance. No need to “put pressure” on a loan officer if closing is 27 days away. I don’t think we have enough info regarding the close date.

    Can’t loan documents arrive at escrow too soon? What is the standard expiration time for loan documents? I’m thinking 10 days…is that “off”.

    • Ardell, you made me smile because you can never get loan docs to escrow “to soon.” LOL. Getting loan docs well in advance of loan lock expiration for purchases and refi’s is a great thing and it does happen from time to time. It nice when it happens because it reduces the stress for every party. Further, it would prevent situations where it forces me or Lynlee to sign a client at midnight, which is what we did for a client a few weeks ago so it would be on track close on time and people get paid.

      • Tim, I wish that were the case…we’ve delivered docs to escrow too soon only to have that escrow company (not yours, of course) forget about our docs…apparently we were not the typical last minute rush they are accustomed to.

  13. Tim,

    Usually I like my clients to have a “float down” option, so I don’t want the loan docs to hit escrow too early in case we want too take advantage of a lower rate a week before closing. So I’ll take the heat for there being such a thing as docs “too early” 🙂

  14. we are the sellers and the buyers who bought r house is waiting for loan docs to get to escrow , they were to sign and close the week of june 25th but the docs that were sent were the wrong docs now we wait agian.

    shouldnt take that long to correct them , we have to close because we have purchased another property and waiting to get funded .

    your life is in the hands of these lenders, but i learned that if the lender messes up and the sale is null and void i am suing the lender for messing up the whole deal and the appraisal.

  15. Scott,

    The actual “approval” of your loan usually happens a few days after the appraisal is complete and the file is sent to underwriting. There could be a last minute snafu if the loan is borderline qualified, but generally speaking “out of underwriting” is the approved phase and it doesn’t go in to underwriting until the appraisal is part of the package.

  16. Usually that means they have sent them to the closing agent who will call you for a signing appointment when docs are “IN” (escrow) vs “OUT” by the lender. Usually happens within 24 hours of one another.

  17. Yes, that is what I would take it to mean. Approved…out of underwriting…in line for docs. Sometimes they give you a number so you know where you are in that line.

  18. Worst luck ever on my way to breakfast and got into a fender bender I have insurance with plenty of coverage they say won’t cost me anything out of pocket will this hurt my home loan we are in line for loan docs

  19. Sorry to hear that Dewey. Oddly more accidents do happen when people are stressed. Relax. In line for docs is usually past the point of needing to worry about things. When is the closing scheduled? Hopefully within the next week to 10 days or so.

    I don’t think there is any connection between the fender bender and your home purchase. There are some cases where it could have an impact, but usually that is only if a judgment shows up against you personally, and I doubt that will happen at all…let alone between now and your day of closing.

  20. Thanks ardell my closing date is set for aug 15 and like I said I have plenty of coverage on my ins they said not to worry there will be no out of pocket expense so I’m due to close in two weeks

  21. I don’t want to raise all kinds of potential issues that are not likely to happen. Close ASAP if it’s a vacant property and I’ll be holding my breath for you. Let us know when you close!

  22. Generally things don’t just “fall out” of escrow without good reason that is somewhat known at the time you make the offer. So here’s hoping for the best! I’m sure it will be just fine. Take a deep breath…count to ten…and DO let us know when everything you worry about…is in the past. 🙂

  23. Yes, that’s good Dewey. Plenty of time to close by the 15th. In fact if the seller is moved out and signed already, you could probably close by Friday. So you have a few extra days room there in the process.

    May I ask which City you are buying in? I’m answering as if you are local with regard to steps after signing today. The papers go back to the lender for review and then it is released for recording. Given you are signing so early, they likely aren’t asking you to bring your money to closing yet, is my guess.

  24. Yes the seller is moved out the house was a flip and I live in bakersfield ca and no money yet so I hope we close by end of the week

  25. It won’t close earlier than the 15th unless you ask them to do that, usually, and the contract should say “on or before” 8/15/2012 or you will need a contract addendum to move the close date.

  26. With regard to “no money yet”, usually the money comes in the day of closing so you don’t have to pay interest on that money before you own the house. So for the money to arrive earlier you need to notify your lender and the closing agent that you would like to close earlier than the 15th, if possible.

  27. Ok so I signed loan docs cut the check to escrow and signed the home owners ins papers they said should be closed Friday or Monday so hopefully Friday

  28. I’m glad it’s working out for you, Dewey. Hopefully our conversation has helped keep your stress level down. 🙂

  29. Hi Ardell! thank you for your postings. were in the process of buying a house. My agent told me that we should have our docs ordered tomorrow…
    It has been a very long process and just wanted to know what that meant? and does that mean we’ve been approved? My agent thats helping us said that we met all the conditions and this is the next step. I just haven’t seen anything in writin saying we’ve been approved but just wanted your opinion. thank you

  30. Hi Catherine,

    Generally speaking I already know that my client “is approved” before I write an offer. So yes, it is correct that usually there is no “you are approved” during the long process. You usually hear that before you make an offer on someone’s home.

    I’ve been in the business 22+ years and only once heard “not approved” in all those years. Even then it was a mistake and became approved 3 days later.

    The process really isn’t long at all, it’s just that the loan docs can’t be ordered and arrive at escrow too early as they expire. Usually in a 30 day escrow you complete your due diligence about the property in the first 10 days to confirm that you indeed do want to buy it. Then you do nothing (though the appraiser is usually still working as is Title and Escrow and the Lender) then in the last 10 days the docs are ordered, sent to escrow, you go and sign, the lender reviews the papers you signed, they send the money to escrow…and you close.

    You sound like you are entering the last phase prior to closing after a long quiet period. That is the norm.

    I will never understand why buyers worry about the loan process so much given they aren’t supposed to make on offer on someone’s house if they are not 99% sure that they can actually get the money to pay for it.

    It’s pretty much a done deal before you write the offer if you have an agent who knows what they are doing.

    Writing that for the benefit of all of the worriers. 🙂

    Yes Catherine, if you are out of underwriting and your file is in line for loan docs…you have been approved. There are often a few funding conditions, but those are usually handled by the closing agent vs you personally.

    Good luck! You must be within a week to 10 days of closing?

  31. We sold (hopefully) our house two months ago. Signed our papers 9 days ago, but are being told that they are still waiting on Loan Docs. Buyer still hassn’t been able to sign. We were told it was a 30 day closing. Sold all our furniture and are living out of boxes. Is this delay normal, and what can we do?

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