What does the term Funding refer to in the context of mortgage loans?

In the context of mortgage loans, the term "Funding" specifically refers to the funds provided by the lender at settlement. This is the point in the mortgage transaction where the lender disburses the loan amount to the borrower or, more typically, to the seller in order to complete the purchase of a property.

Funding is a crucial step because it represents the actual transfer of money that makes the mortgage effective, allowing the borrower to take ownership of the property. This process includes verifying that all conditions of the loan have been satisfied and that the necessary documentation has been completed. In essence, the funding is the final step in the mortgage process after the loan application, underwriting, and approval phases have been completed.

Understanding this definition helps clarify the role of funding in a mortgage transaction compared to other aspects like the total amount lent, monthly payments, or interest accrual, which are all related to the mortgage but do not define the act of funding itself.