July 12th, 2021 1:38 PM by Jackie A. Graves
The closing disclosure is the last document you’ll receive before you close on your home loan. Review this detailed five-pager carefully to make sure all the numbers look correct before closing day.
What is a closing disclosure?
A closing disclosure is a legally required five-page statement of your final mortgage loan terms and closing costs. It contains details about your loan terms, monthly payments, fees and closing costs.
Why the closing disclosure is important
Your mortgage lender must provide you with the final details of your loan in the closing disclosure at least three business days before closing. That gives you time to compare the final terms and costs with the information you have previously been given on your loan estimate, the three-page document you received when obtaining the mortgage offer.
You should compare the closing disclosure with the loan estimate to see if anything has changed. If anything is unexpected or incorrect, you have time to ask the lender to clarify before the closing.
What’s in the closing disclosure
Sample closing disclosure
This sample closing disclosure from the Consumer Financial Protection Bureau (CFPB) is a helpful illustration of what your closing disclosure will look like. There is an interactive checklist on the right side of the document. If you’re not sure what to check, use the prompts for each section of the document to guide you.
What is the three-day waiting period?
The “Know Before You Owe” mortgage rule, also known as TRID (the TILA-RESPA Integrated Disclosure rule), went into effect in 2015. This regulation includes a requirement that you receive your closing disclosure three business days before closing. This was meant to protect borrowers from surprises at closing.
By giving you three business days to review your closing disclosure, you’ll have time to check all the numbers and bring up any questions you might have before sitting down at the closing table. Take advantage of this time to look over all the terms of your mortgage loan, and talk to your lawyer, housing counselor or loan officer if you have any questions.
How to check your closing disclosure
With your most recent loan estimate handy, go through each line of the closing disclosure and compare the two documents, including:
What can and can’t change on the closing disclosure
When checking the closing disclosure, you need to know that some mortgage costs are allowed to change while others cannot. One thing that is certain: Lenders can’t deliberately understate your costs and then raise the prices at closing time.
In general, if any of the following was changed from your loan estimate or looks unfamiliar, contact your lender and ask for an explanation.
Note that some closing costs cannot increase, such as fees paid to the lender or mortgage broker, or fees for required services that you did not shop separately for, or that you paid for from an affiliate of your lender or mortgage broker. Transfer taxes cannot increase, as well.
However, if there is a “change in circumstances” which requires a new loan estimate, these costs can change by any amount. A change in circumstances could be when you decide to get a different type of loan, put down a different amount, your home doesn’t appraise at the expected value, your credit file changes, or your income documentation isn’t as expected.
Other closing costs can increase without limit, including prepaid interest, insurance premiums, initial escrow account deposits and fees for some third-party services. These costs are not controlled by your lender.
There is a third category of closing costs that are permitted to increase by up to 10 percent. These include recording fees and some third-party service providers. If there is a change in circumstances, these costs could increase by more than 10 percent.
What to do if there’s an error on the closing disclosure
If anything on the closing disclosure looks incorrect, you need to notify the loan officer and title company to fix it before the closing. The document may need to be redone — which could delay the closing date — so it’s important to contact them immediately.
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