#1. Prior to docs conditions

This is after loan submission to the lender and after the loan has been approved but before the lender draws loan documents. Examples are qualify control audit, current/last pay stub, appraisal review, mortgage insurance approval, estimated HUD-1, and final clearance on termite report.

At this point in the process, called the prior to doc conditions, is critical for the loan because it is the last time the loan papers are thoroughly checked before the loan is funded and closed. When the audit is completed, the lender knows that the file has been reviewed to see that it is correct. The actual loan documents have been drawn and are now ready to go to escrow for signing.

#2. Prior to funding conditions

This is after the loan is approved and loan documents have been drawn but before the loan is funded by the lender.

When the loan docs reach escrow, the borrower is notified to sign the paperwork. At escrow, the loan docs are signed and notarized. However, before the loan docs are returned to the lender for funding, the escrow must see that the final instructions, called prior to funding conditions, have been met.

#3. After funding conditions

This is after the loan has closed [after Close of Escrow] but before the file is forwarded to the investor. Examples are original fire insurance policy, certified copy of HUD-1 closing statement on borrower's former property, and original policy of title insurance.

It's good to know that each lender has specific requirements for underwriting guidelines and for final loan approval. Lenders differ substantially on the criteria they use to approve a loan subject to conditions.