The lender's written directions to the title company or settlement agent setting exactly what must be true before loan funds may be disbursed.
The longer version
Closing instructions turn the loan approval into operational orders. They specify the documents to be executed and recorded, the order of recording, the title policy and endorsements required, the disbursement authority, and the conditions under which funds must be returned rather than released.
They are also the lender's protection. If a settlement agent disburses without satisfying the instructions, the instructions are the evidence of what was required. That is why they are signed and acknowledged rather than merely sent, and why a change late in the process needs to be issued as an amendment rather than agreed on a call.
Common questions
- Who issues closing instructions?
- The lender or its counsel, addressed to the title company or settlement agent handling the closing and disbursement.
- What do closing instructions usually cover?
- Required documents and signatures, recording order, the title policy and endorsements, insurance evidence, the disbursement authorization, and what to do if any condition is unmet at the time of funding.
- What happens if instructions are changed at the last minute?
- The change should be issued in writing as an amended instruction. A verbal change leaves no record of what the agent was authorized to do, which becomes a problem in any later dispute or exam.