Funding at closing represents the crucial final step in the residential real estate buying process. After all the negotiations, inspections, and paperwork, this is when the loan money is actually disbursed by the lender, enabling the transaction to close and the buyer to take possession of the property.
During the closing meeting, the buyer signs numerous documents, including the loan agreement and closing disclosures that outline costs. To participate fully, buyers must bring certified funds—typically via cashier’s check or wire transfer—to cover their down payment and closing costs, as shown in the Closing Disclosure document. This disclosure explains the financial details, including loan amounts and fees, that the buyer is responsible for. For more on closing costs, see our Mortgage Closing Costs article.
Once the buyer completes their part, the title company or escrow agent notifies the lender to release the funds. The lender then wires the mortgage proceeds—loan amount minus down payment—to the escrow account managed by the title company. The title company acts as a neutral third party, disbursing funds to the seller to pay off any existing mortgages, real estate agent commissions, property taxes, and finally paying the seller their net proceeds. The new deed is then recorded with the county, legally transferring ownership to the buyer.
The timing of funding relative to possession varies by state law, categorized as either “wet funding” or “dry funding.” In wet funding states, funds are disbursed and the buyer receives keys on the same day the documents are signed, allowing immediate possession. In dry funding states—found primarily on the West Coast—funds may not be wired until several days after closing, delaying possession until the transaction fully completes.
Common reasons for delays in funding include errors in closing documents, wire transfer timing issues, or last-minute lender verifications. Understanding the funding process helps buyers anticipate the final steps needed to become homeowners.
For buyer protections and official guidelines, see the Consumer Financial Protection Bureau’s resources on mortgage closings and refer to the Closing Disclosure page for detailed cost breakdowns.
Related articles on FinHelp.io include Title Company, which explains the role of the neutral party managing funds, and Closing Costs, which covers the expenses buyers need to prepare for during closing.
By grasping funding at closing, buyers can approach the final stage of home buying with confidence, knowing exactly how and when the funds move to complete their purchase.