What is a Mortgage Funder?
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One of the most exciting times in the loan approval process is getting the news that your mortgage money has been received. Once everyone has been paid, the next step is to record the deed to the property into your name, making you the official owner.
A mortgage funder is responsible for fine-tuning all the final details of your loan so that you can pick up your keys, get the moving truck ready and start enjoying your new home.
What does a mortgage funder do?
The mortgage funder works for your lender, and he or she has a number of responsibilities that are related to making sure everything in your loan package is ready. Most importantly, they make sure the proceeds of your home loan go to the correct place.
Although you won’t likely ever speak to the mortgage funder, their job is very important to the completion of the home loan process. Here are some of the more important functions of a mortgage funder.
Making sure all of the documents are accurate
There are a number of small details that need to be accurate before your loan closes. Maybe you’re a Junior, or maybe you have a hyphenated family name — either way, your name has to be reflected correctly on your loan application, preliminary title report, deed of trust, homeowner’s insurance and the appraisal to your property.
The property address also has to be exactly the same on all of your documents. It can’t have “Avenue” spelled out in one place, and then be abbreviated “Ave” in another. The funder also confirms the legal description on all of your documents, especially your title information and appraisal, since these are the documents that contain all the legal boundaries of the home you are buying.
Making sure you get credit where credit is due
When you first made the offer for your house, you probably had to make an earnest deposit as a good faith gesture of your intent to buy your home. You also likely paid $350 to $600 for an appraisal on your property.
The mortgage funder makes sure they have the paid invoices for the home appraisal and any other fees you pre-paid. They will also make sure they have copies of your canceled check for your earnest deposit, so you get credit for pre-paying those items at your closing.
If the seller is paying any of your closing costs, the mortgage funder makes sure you get the proper credit by working with the escrow officer or attorney to balance the amounts due.
Finalizing your escrow account for property taxes and insurance
The exact amount you need for your escrow account is not finalized until the end of your transaction, since the prorations will change based on the tax authority in the area you are buying. The amount you’ll need depends on what time of year you are closing — the closer you are to the next due date for local taxes, the more will be needed in your escrow account.
The funder will also want to make sure you have your homeowner’s insurance set up correctly so that it goes into effect as soon as you become the owner of your new home. The mortgage funder will also make sure the invoice for your homeowner’s insurance gets to the title company so it is paid in full with your closing funds.
Clearing any approval conditions
In most cases, all of the approval underwriting conditions will be cleared prior to your closing. Perhaps you’re waiting for your first pay stub at a new job, or you recently paid off some debt that was still showing up as owing on your credit report.
The mortgage funder will work with the loan underwriter to confirm that the documents you provided are acceptable, and then your loan can be cleared to fund.
Setting up the wire of funds to your escrow
Once your closing documents have been received and the funder confirms they are all signed and notarized correctly, the wire will be set up for your closing. Once the funds are received in your escrow company’s bank, the funds can be sent out to all the appropriate parties, and the deed can be recorded into your name.
How to ensure a smooth funding process
Your loan is not officially finished until the money is sent, so you don’t want to make any changes to your income or credit prior to closing. The funder will likely work with a quality control department to re-verify your employment and credit to make sure there are no changes, and if there are, there could be major delays and problems.
Keep your current job
Lenders are required to confirm your employment at least 10 business days before you close, and in many cases, the verifications are done right before or on your signing date. A sudden change could result in a denial, because the lender would have to thoroughly re-approve you based on your new job and income.
Don’t charge on your credit cards
Most lenders will perform something called a “soft pull” credit report, which updates the balance information on your accounts without affecting your credit scores. Any new credit could not just delay your loan, it could result in a denial of your loan.
Use the bank account listed on your loan application before closing
The mortgage funder will be looking for a cashier’s check from the bank account(s) you listed on your loan application. Pre-closing is not the time to transfer all your accounts to a high yield savings account to earn an extra 1% on your balance.
While it’s not likely to result in a denial, it could definitely delay your funding and create a lot of stress.
Beware of wire fraud
Wire fraud in real estate purchase transactions has become an epidemic in the U.S. According to the FBI, fraudulent transfers have been sent to 115 countries, with more than $12 billion stolen from homebuyers between 2013 and 2018.
Signs of an email real estate wire scam
In most cases, hackers compromise your real estate agent or title company’s email accounts, and set up a software to track all of the communications without anyone knowing. If you’re educated about what to look for, and follow the tips below, you could save hundreds of thousands of dollars and the heartache of being a victim of real estate wire fraud.
Tip #1: Verify any email you get instructing you where to wire funds
Never wire any money without speaking to a representative of the title company listed in your contract. Even if the email comes from your realtor, you should call the person who is handling your escrow to confirm any email correspondence. Never click on links or reply until you’ve confirmed the contact information verbally using a known number.
As an added back-up, call your loan officer to confirm the wiring instruction they are using — the mortgage funder will be sending your loan funds to the bank listed on these instructions, so it will be the most accurate information for you to review. You should still make the final confirmation with a known representative of the company handling your escrow.
Tip #2: Never wire your money before you’ve signed your closing documents
The best way to avoid any wire fraud scheme is to confirm all of the wiring information at your signing with your attorney or escrow officer right in front of you. Even if you are signing with a notary, there is no reason to wire your funds prior to your closing date.
Tip #3: Check to see who the beneficiary of the wire is
The legitimate wiring instructions for a real estate transaction should always have some reference to you as the buyer, the escrow number (which is a number assigned by the title company for your transaction), and should indicate the title company as the ultimate beneficiary.
Tip #4: Only use contact numbers from your purchase contract
Never trust a new contact number listed in an email unless you can validate the contact with a known phone number listed on your purchase agreement or contract. This is part of tip #1, but it’s worth repeating: Don’t reply back to any email directing you to wire any funds, or click on any links to provide any information within the email.
There is no way to recover the funds lost in this type of a scam. Since you initiate the transfer of your funds, the federal banking insurance protections for fraud don’t apply. Because the funds are often wired into an overseas account, U.S. law enforcement has limited options for trying to recover them.
Mortgage funders are the final gatekeepers to your loan funds
Chances are your loan funding will occur without you having to do more than wait for the phone call from your realtor or agent that the wire has been received. Following the steps above to ensure a smooth loan process, along with protecting yourself from wire fraud scams, will make this final official step into homeownership hassle-free.