As a homeowner-to-be, you’re excited about your journey towards homeownership. You’ve already tackled the complexities of the mortgage application process, and now it’s time for the final step: the closing. One crucial document you’ll encounter during this stage is the Closing Disclosure (CD).
What Is a Closing Disclosure?
The Closing Disclosure is a five-page document that provides a detailed breakdown of the final terms and costs of your mortgage loan. It’s designed to be a clear and concise summary of your mortgage transaction. Lenders are required by law to provide this document to borrowers at least three business days before the scheduled closing date.
Why Is the Closing Disclosure Important?
Clarity and Transparency
The CD is designed to provide borrowers with a clear and detailed overview of the financial aspects of their mortgage loan. This transparency helps prevent surprises at the closing table.
Comparison to Loan Estimate
The CD allows borrowers to compare the final terms and costs with the Loan Estimate (LE) they received earlier in the application process. It ensures that the terms of the loan align with what you were initially quoted.
Additional Read: What Information Is Needed for a Loan Application
Avoiding Delays
Reviewing the CD in advance allows you to address any discrepancies or concerns before the closing date, minimizing the risk of closing delays.
Understanding Your Closing Disclosure
Now, let’s dive into the key sections of your Closing Disclosure:
Loan Terms
This section outlines the loan amount, interest rate, monthly principal and interest payments, and whether the loan has any special features like prepayment penalties.
Projected Payments
Here, you’ll find an estimate of your monthly payments over the life of the loan, including any escrow amounts for property taxes and insurance.
Costs at Closing
This section details all the costs associated with the closing, including origination charges, fees for services, taxes, and insurance premiums. It also specifies the amount of cash you’ll need to bring to closing.
Loan Costs
It provides a breakdown of the costs directly related to your mortgage, such as points, lender credits, and other loan-related fees.
Other Costs
This section includes fees for services like appraisals, title searches, and inspections. It’s essential to understand these third-party costs.
Calculating Cash to Close
Here, you’ll find the total amount you’ll need to pay at closing, including your down payment and any credits or adjustments.
Summary of Borrower’s Transaction
This summarizes the financial aspects of your transaction, showing the funds you need to bring to closing or receive at closing.
What to Do When You Receive Your Closing Disclosure
Review Thoroughly
Take your time to carefully review the Closing Disclosure to ensure it aligns with your expectations and the Loan Estimate.
Ask Questions
If you have any questions or notice discrepancies, don’t hesitate to contact your lender or settlement agent for clarification.
Plan Ahead
Ensure that you have the necessary funds available for closing, and verify the payment method with your lender.
Stay Organized
Keep all your mortgage-related documents, including the CD, in a safe and easily accessible place.
Understanding your Closing Disclosure is a crucial step in the home-buying process. It empowers you to make informed decisions and ensures a smoother closing experience. Remember, your mortgage lender is there to assist you throughout this process, so don’t hesitate to reach out with any questions or concerns. Here’s to a successful and stress-free closing day and to the exciting journey of homeownership ahead!
Additional Read: Ten Useful Tips From Experts on Your Closing Day Checklist
