Funding

Once the borrower signs loan documents and the direct lender receives the executed package back from the closing agent, the underwriter performs a final review — sometimes called a 'funding conditions' check — to confirm all documentation is in order. After any remaining PTF (prior-to-funding) conditions are cleared, the direct lender's funding department initiates a wire transfer from their warehouse line of credit to the closing agent's trust account. Wire transfers for residential mortgages typically range from $100,000 to several million dollars.

Timing of funding depends on whether the loan is a purchase or refinance and what state you're in. In escrow states (primarily Western states), funding and recording are typically same-day events — the direct lender wires in the morning, escrow records the deed and disburses funds in the afternoon. In attorney states (primarily Eastern states), funding may occur at the closing table, with the attorney holding funds and recording immediately. For refinances, federal law (under the Right of Rescission, 12 CFR 1026.23) requires a 3-business-day waiting period after signing before the direct lender can fund owner-occupied primary residence refinances.

Funding failure — when a direct lender cannot wire on the scheduled closing date — is a serious problem in a purchase transaction. It can delay recording, cause the borrower to lose their rate lock, and create liability under the purchase contract. This is why choosing a direct lender with robust warehouse banking relationships and internal funding departments matters. A direct lender who funds from their own warehouse line is far less likely to experience a funding delay than one who relies on a third-party funder.