mortgage loan documents

4 key facts that are going to make your Closing Disclosure make sense

Bethany RamosFirst-Time Homebuyer, Home Buying, Industry Professionals, Loan Officers

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May 22, 2018.

You’ve finished shopping, you’ve done the tour and the inspection, and you’ve even prequalified for a home loan you’re happy with. But before you can actually buy your house and get your keys in hand, there’s one last hurdle that stands in your way. You’ll need a signed Closing Disclosure (CD) to complete your purchase.

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The 4 most common Closing Disclosure questions, explained

At closing, also called the settlement, the ownership of a house is legally transferred from one person to another. As The Mortgage Bankers Association explains, this is your last stop in the mortgage process where you, the buyer, officially become a homeowner. Your Closing Disclosure, provided by your lender, comes into play at closing because it details which fees you’ll need to pay to close on your house.

The Closing Disclosure is a “Very Important Document” that most homeowners speed through because they’re so darn excited to close and get into their new house. While this excitement is understandable — you’re buying a new house! — we like to remind our buyers of how important it is to take a moment to review the Closing Disclosure in full before you sign. For such a standard mortgage loan document, it contains critical information.

These are the four Closing Disclosure questions we hear the most from our borrowers, plus answers to make it make sense:

1. What is it?

“A Closing Disclosure,” explains the Consumer Financial Protection Bureau (CFPB), “is a five-page form that provides final details about the mortgage loan you have selected. It includes the loan terms, your projected monthly payments, and how much you will pay in fees and other costs to get your mortgage (closing costs).”

A lender creates a Closing Disclosure when your home loan is “clear to close”:

  • Receiving a Closing Disclosure indicates that you’re that much closer to the end of your home buying journey.
  • You’re provided with a Closing Disclosure by your lender for your own mortgage management and protection.
  • As a buyer, you’ll review your Closing Disclosure to confirm that you’re receiving the mortgage terms you first agreed upon at closing.

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2. What do I do with it?

The reason you’ll hear such emphasis placed on the Closing Disclosure is because it is relatively new. If you’ve applied for a loan on or after October 3, 2015, your lender is required to give you a Closing Disclosure at least three business days before you’re set to close on your loan. As the Consumer Financial Protection Bureau advises, you can use these three days to compare the final terms and costs in your Closing Disclosure to your original Loan Estimate provided by your lender.

The final Closing Disclosure rule, released by the CFPB in July 2017 and advocated for by the National Association of Realtors, allows you to share your CD with third parties. Realtors appreciate this ruling as a benefit to realtor-client relationships, permitting a buyer to share their Closing Disclosure with their realtor within the bounds of applicable state laws and local regulations.

3. What should I look for?

Now it’s time to start checking, double-checking, and comparing:

  • The first page of the Closing Disclosure is identical to the first page of the Loan Estimate to make these comparisons easy.
  • On the second page of the Closing Disclosure, you’ll find fees listed in the same categories and order of the Loan Estimate — again, to make things easy.
  • It’s especially important to check the Lender Credits reflected in a lump sum at the bottom of page 2.
  • The document is five pages in total with a signature line on page 5.
  • Before you sign, make sure to note and discuss any discrepancies with your lender.

For those who receive a Closing Disclosure for a mortgage refinance, your new loan terms will read as “Appraised Property Value” versus the “Sale Price” seen when buying a house.

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4. How much do I have to pay?

If your Closing Disclosure reflects your Loan Estimate, then you can move along your merry way. Otherwise, you can progress toward closing once any errors or inconsistencies in the document have been taken care of by your lender. This is when you want to pay attention to page 3, which outlines how much money you’ll need to bring to your settlement at closing in the Calculating Cash to Close tab. Once you’re in agreement and your Closing Disclosure has been signed and returned to your lender, you’ll bring this amount in a certified or cashier’s check to your closing.

One last tip before you throw your signed paperwork in the air and grab your keys at closing: Keep copies of your signed mortgage documents handy. You’re going to thank yourself come tax season. If you recently bought a house, your CPA will request a copy of your Closing Disclosure at tax time. Essentially, H&R Block points out, your Closing Disclosure is your receipt for purchasing your house. It’ll have a breakdown of which costs are immediately tax-deductible or could be tax-deductible over time, relevant to your upcoming return.

If you don’t have a copy of your Closing Disclosure saved and filed, not to worry. Your loan officer can send you another copy, and your accountant can contact your loan officer directly with any questions. We can also refer you to an accountant we’ve successfully worked with in the past, should you need one.

Keep calm and ask questions

This is something we encourage all our buyers to do through each step of the lending process. Buying a house can get confusing, particularly when you’re wading through and signing paperwork. But it doesn’t have to be hard. We don’t ever want your Closing Disclosure to stand in your way. If there’s a problem with your Closing Disclosure, we want to know about it. Contact your loan officer or swing by our office, and we’ll come up with a quick solution that doesn’t hold up your closing.

For educational purposes only. Please contact a qualified professional for specific guidance.

Sources are deemed reliable but not guaranteed.

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