April 4th, 2018 7:19 AM by Jackie A. Graves, President
What is a closing disclosure form? Put simply, it's a form
outlining the terms and costs of your mortgage—and one of the most
important pieces of paperwork to check before you close on a home.
must provide borrowers with a closing disclosure (also called a CD) at least
three business days before closing—that day when all the remaining paperwork is
signed and you get the keys to your new home. You can also see the CD
as the official follow-up to a more preliminary document you received
when you first applied for your loan called the loan estimate, or LE (also
known as a good-faith estimate).
LE outlined the approximate fees you would be expected
to pay if you move forward with a lender to close on a home. But your
closing disclosure is the real deal, which is all the more reason to
scrutinize it carefully.
Closing disclosure vs. settlement statement?
Aug. 1, 2015, the CD was known by another name: the HUD-1 settlement
statement. Yet this document was long and confusing, and required by
federal law to be distributed to home buyers only on the day of closing—which
didn't give them much time to address any issues. This is why the
settlement statement was replaced by the much more streamlined five-page
closing disclosure, and laws were changed so that lenders are required to
provide this document at least three business days before closing.
even so, the CD can still be confusing—so let's break it down so you know what
you're looking at, shall we?
Why you should compare your CD with your LE
checking items on your CD, you'll want to compare what you see with
what's on your loan estimate. Many of the numbers and terms should match up (or
close), but some may change because weeks or even months may have passed
since you first applied for you loan.
Unless you locked in your mortgage interest rates, those rates may
have changed. The title company or attorneys involved may have nudged up their
fees. That's all par for the course, but you'll want to keep an eye out for
errors such as typos in names or numbers.
such errors aren't common? A recent survey of real estate agents by the
National Association of Realtors® found that half of agents have
detected errors on CDs. In other words, it really pays to check this document
carefully and ask your real estate agent for help.
changes are significant enough or troubling to you, you'll want
to notify your lender and title or closing company immediately. Remember,
you may have received your CD just three days before closing, so the clock
is winding down fast.
you do spot problems, what then? Depending on what the underlying issue is,
“changes can be made in a manner that does not disrupt the closing of the
loan," says Keith Gumbinger, vice
president at HSH.com,
a mortgage information website.
some cases, though, the closing may have to be postponed so that a new closing
disclosure can be sent out with a new three-day review period.
a list of things to triple-check on your CD and compare with your LE
from the Consumer Financial Protection Bureau:
this is your first time purchasing a home—or you purchased your last home
before Aug. 1, 2015 (when the CD replaced the HUD-1)—sit down and review a sample CD from the CPFB. If you have any questions, ask your
loan officer or real estate agent for a line-by-line explanation of the
form. Trust us, this extra dose of oversight is well worth it!
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