Closing Disclosure
The Closing Disclosure is one of the most significant documents you will encounter during the mortgage process. This comprehensive 5-page document outlines the terms of your home loan, including your monthly payments, interest rates, and detailed closing costs.
Since October 3, 2015, homebuyers have been receiving the Closing Disclosure instead of the previous HUD-1 Settlement Statement, following the Consumer Financial Protection Bureau’s (CFPB) oversight of the Real Estate Settlement Procedures Act (RESPA).
Your lender is required to provide you with the Closing Disclosure at least 3 business days prior to your closing date. This timeframe allows you to compare the final costs presented in the Closing Disclosure with those initially outlined in the Loan Estimate (which replaced the Good Faith Estimate). It is important to note that some costs may be significantly higher than those quoted in the Loan Estimate, and you have the right to review and question these changes.
In addition to comparing costs, it is crucial to verify other important information on the Closing Disclosure. Check for any prepayment penalties or balloon payment clauses associated with your loan. Also, review whether there are items that are not included in your escrow account.
Take advantage of the 3 days before closing to thoroughly review the information in your Closing Disclosure with your loan officer. This ensures that you fully understand the terms of your loan and are well-prepared for the closing process.
