Among the many documents you’ll receive during the escrow process will be the “Closing Disclosure,” a five-page document that outlines the major terms and conditions of your mortgage loan, including the purchase price of your home, the loan’s interest rate, associated loan fees, your estimated property tax and insurance costs, closing costs and other expenses associated with the mortgage.
Although you may be overwhelmed with paperwork and legal language by the time you receive your closing disclosure, it’s critically important to understand and carefully review the terms of this document, as it contains all of the terms to which you will be agreeing. If there is an error, or a confusing term in the document, it is essential that you clarify, correct, or understand it before signing your loan documents at closing. Learn more about what a closing disclosure is, and what to look for as you review yours.
When Will I Receive The Closing Disclosure?
2015’s federal “Know Before You Owe” law, also known as TRID (the TILA-RESPA Integrated Disclosure rule) requires your lender to send you the closing disclosure document at least three business days before closing. The law, intended to protect buyers from surprises or mistakes in their mortgage documents, allows you to review these documents carefully before finalizing your loan paperwork.
It’s important to use this time to verify that the information in the closing disclosure matches up with the information you received in the lender’s loan estimate. The loan estimate, also required by TRID, should have been provided by your mortgage lender at the time you applied for the loan. If there are any discrepancies between the two documents, this is a good time to connect with your agent, attorney, or lender to resolve these issues.
What Is In The Closing Disclosure?
The closing disclosure is a five page document, the form of which is prescribed by law. Each page of the document contains information that you, the borrower, should review carefully and compare to your loan estimate and any other loan documents you’ve received from your lender.
Closing Disclosure Page 1
The first page of the closing disclosure is the most important. It contains the buyer and seller’s information, loan terms including principal, loan type, and interest rate, the projected monthly payments, and estimated closing costs. Buyers should review each piece of information carefully. Pay particular attention to the buyer’s information — even a small error in your name can cause problems down the road. Buyers should also review the principal and interest amounts, comparing these items to any other information the lender has provided. Be sure to check to see whether your loan has a prepayment penalty, and what the potential costs could be of early repayment — this term can affect your ability to refinance your home down the road.
Page 1 also shows whether your loan requires you to pay for homeowners insurance, mortgage insurance, and/or property taxes with your monthly principal and interest payment. If you are required to make these payments, their costs will appear here. Same goes for mortgage insurance. Finally, the first page lists the loan’s closing costs and how much cash you’ll need to close.
Closing Disclosure Page 2
The second page of the closing disclosure contains a detailed breakdown of your loan’s closing costs, including an itemized list of which closing costs are paid by the buyer and which by the seller. Be sure to carefully review these costs to ensure that they conform to your understanding of what you have paid, will pay, and what costs are the seller’s responsibility. If you have any questions about a particular line item, this is a great opportunity to seek clarification from your agent or closing officer.
Closing Disclosure Page 3
Page 3 itemizes the estimated cash to close, as well as a summary of transactions. Review these tables carefully to ensure that the purchase price, down payment, and any HOA dues or other costs are correctly reflected.
Closing Disclosure Page 4
This page contains the loan disclosures, including whether your loan may be assumed by a future buyer, whether your lender will accept partial payments, and the requirements of your loan with regard to escrowing property taxes and home insurance payments. Many loan agreements require that borrowers pay some part of the annual property tax and home insurance payment each month, to avoid the potential for default at the end of the year. This table will help you to understand the monthly amount that will be added to your payment to provide for the escrowing of these costs.
Closing Disclosure Page 5
The final page of the closing disclosures includes the total amount you will pay over the life of the loan, including principal, interest, mortgage insurance, and loan costs. It also contains contact information for the lender. This page should be reviewed, and maintained in the event of an issue down the road with your loan.
What Should I Do If Something Is Wrong With The Closing Disclosure?
If your review of the closing disclosure statement indicates an error or an incorrect term, do not delay in correcting it! Contact your real estate agent, attorney, closing officer, or your lender immediately to ensure that the error is corrected before you sign your documents at closing. Generally, if a material error is discovered in your closing disclosure, a new disclosure must be issued and a new three-day review period must pass before you can sign your documents. Carefully reviewing this document can help to avoid a costly mistake in the months and years to come, and is an important part of protecting your interests in your home purchase.
Landtrust Title: Your Partner for Results
When your real estate agent works with Landtrust Title, you get a partner for results. We do things differently than other title companies — whether it’s personalized support, convenient closing times that meet your schedule, or quick and easy payment methods ensuring everyone gets paid right away, our attention to detail will help ensure a smooth transaction. We’re obsessed with making your experience so seamless, you don’t even have to think about it.
If you have questions about what to expect when your real estate deal closes, Landtrust Title Services can help. Please contact us today at [email protected] or by phone at 312.528.9210.