February 18th, 2020 11:25 AM by Jackie A. Graves, President
Disclosure is the final document you'll see before a mortgage closing. It's an
accounting of fees, your mortgage rate and closing costs.
The Closing Disclosure is the final document you’ll see in the
mortgage loan process — just prior to that massive pile of paperwork you’ll
face at closing. It’s only five pages, yet there are plenty of questions to
answer about what exactly it is and how to use it.
The Closing Disclosure
form is issued at least three days before you sign the mortgage documents. It
is a final accounting of your loan’s interest rate and fees, mortgage closing costs, your monthly mortgage payment and the
grand total of all payments and finance charges.
You will want to
compare the Closing Disclosure with the most recent Loan Estimate from your lender, to see if anything substantial has changed.
Closing Disclosure three-day rule
Having time to discover any changes or errors in the Closing
Disclosure form is the reason why there is a “three-day rule.” If there is any
discrepancy in the terms or details of the loan, compared with what you last
saw on the Loan Estimate, you can contact the lender or settlement agent within
three business days and avoid any last-minute drama at closing.
Even things that seem to be minor errors, such as typos or
misspellings, should be questioned and corrected ahead of time.
There are three instances where a change can trigger the issuance
of a revised Closing Disclosure and a new three-day waiting period:
1. A change in the annual percentage rate — the APR — for
2. A prepayment penalty is added to your
loan, though these are rare these days.
3. Switching your loan product; for example, moving from a fixed to
an adjustable-rate mortgage.
The Consumer Financial
Protection Bureau regulates the mortgage lending industry and provides a sample Closing Disclosure form. Each sample page
highlights particular items that you should check for accuracy.
Does Closing Disclosure mean clear to close?
If the Closing Disclosure meets your expectations, you are clear
to close. However, the loan doesn’t become official until you sign all the
paperwork at closing. And things can change in the three business days before
There are at
least six ways to sabotage a mortgage approval, including a change
in your credit, job or compensation, and even making a large purchase.
After you sign the Closing Disclosure, the mortgage paperwork is
prepared and all parties involved in the transaction get set to close the loan
within three days.
Can you waive the three-day Closing Disclosure?
You can waive your right to a three-day waiting period only if you
have a “bona fide personal financial emergency,” the CFPB says. You’ll need to
provide a dated and signed written statement to the lender or closing agent
describing the urgent matter.
It’s uncommon but not
impossible for closing costs to change after a Closing Disclosure is signed.
For example, if you haven’t locked your mortgage rate, it may rise or fall
It’s more common that some things might have changed in the time
between your receiving the Loan Estimate and getting the Closing Disclosure.
You might see differences in the amount of prepaid interest,
homeowners insurance premiums, recording fees or third-party charges. These
aren’t controlled by the lender and can vary.
Some modifications rise to a level called a “change in
circumstances” that can trigger a major adjustment to your closing costs — and
the issuance of a new Closing Disclosure.
If you modify the amount of
your down payment.
If you change the loan
If the home you’re buying
appraises at a value different than expected.
If there’s a change in your
credit or the lender cannot verify income.
What cannot change: Lender or broker
fees, other fees that you were not allowed to shop for and transfer taxes —
unless you experience one of the “change in circumstances” above.
Regardless of the timing of any changes, whether weeks or days
after receiving the Loan Estimate — or after an hour at the closing table — you
are well within your rights to take a breath, to read and reread the documents.
And ask as many questions as it takes to understand what you’re
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