Financing, Escrow, and Settlement Procedures
Loan and disclosure timelines
- Loan Estimate within 3 business days of a complete application; Closing Disclosure at least 3 business days before consummation.
- A revised Closing Disclosure restarts the 3-day clock only in specified changed circumstances, such as an APR change beyond tolerance, a loan product change, or an added prepayment penalty.
- Tolerances: zero for lender fees and transfer taxes, 10% aggregate for certain third-party services, unlimited for items the consumer shops for from an approved list.
- PMI: the borrower may request cancellation at 80% loan-to-value on the original schedule; automatic termination occurs at 78%.
Escrow and settlement
- Earnest money is trust funds: no commingling, accurate ledgers, disbursement only on authorized signatures.
- Good-funds rules limit what may be deposited and when.
- Settlement statements debit and credit each party; prorations split taxes, rent, and HOA dues as of closing.
Worked example
Annual property taxes are $4,380 and closing is June 15, with the seller responsible through the day before closing, using a 365-day year. Per diem = $4,380 ÷ 365 = $12.00. Days charged to the seller = 165 (January 1 through June 14). Seller credit to buyer = 165 × $12.00 = $1,980. The buyer's statement shows a $1,980 credit; the seller's shows a $1,980 debit.
Traps that cost marks
- Counting the closing day twice, or not at all.
- Treating every re-issued Closing Disclosure as automatically resetting the 3-day waiting period.
- Letting a seller condition the sale on the buyer's use of an affiliated title company, which raises RESPA Section 9 problems.