Before sealing the deal on that home loan, there is one last piece of document that you need to be extra careful about — Closing Disclosures.
A closing disclosure is a mandatory statement, usually five pages in length, of your final mortgage loan terms and closing costs. It contains details about your loan terms, monthly payments, fees, closing costs, and other pertinent details.
Before closing, your mortgage lender must give you the final details of your loan, including the terms and costs, within at least three business days before the deal closes. Doing so allows you to compare the terms and costs with those provided by the loan estimate. Once received, compare the details on the disclosure with the loan estimate that you received and check if there are any changes or discrepancies. Do not hesitate to bring up any irregularities with your home loan provider.
What should you check for in a Closing Disclosure?
You should pay particular attention to the following items in the Closing Disclosure:
Loan terms – The figures should match your loan term. Check whether the following will increase after closing: the loan amount, interest rate, monthly payment (principal plus interest), and termination fee if any.
Projected payments – Check if the total for your monthly payments matches the principal including interest and your insurance fees if there are any.
Costs of closing – These are considered as upfront costs or settlement costs. They cover loan costs, lender credits, and the amount you’ll be required to pay at closing.
Loan costs – These are charges directly related to the loan such as application fees, underwriting fees, and points that you have to pay. Other fees that might be included in this section are credit report, appraisal, settlement agent fee, and title search.
Miscellaneous costs – This section may include recording fees, transfer tax, and insurance premiums required when signing.
Calculating cash to close – This area sums up your payments and balances them out with your closing costs. Here you can check the deposits and credits you’ve already paid or received, along with other changes incurred since your loan estimate was provided.
Summaries of transactions – This provides a breakdown of your costs such as the home price, closing costs, and the seller’s costs.
Loan disclosures – Here you’ll see legal language describing the important characteristics of your loan, such as assumption, demand feature, negative amortization, and escrow.
Loan calculations – This is your payment term and shows the total amount you are committing to pay over the life of the loan, including interest charges.
Other disclosures – This includes details such as the appraisal, penalties if there are missed payments and need-to-know details of your loan.
Contact information – This includes details on how to reach all the parties involved in your loan.
Confirm receipt – Signing this page at closing indicates that you’ve received it.
Should you find any discrepancy or irregularity on your closing disclosure, we suggest that you call your loan officer and title company, so that they can fix it before the closing. Doing so will not only avoid further delays but will also help you avoid legal concerns in the future.
