As anyone who has been through the homebuying process can tell you, there are several important documents that are typically involved. One of the single most vital, and one that all homebuyers will deal with eventually, is known as the closing disclosure.
At Supreme Lending, clients regularly contact us for assistance with several parts of their homebuying and mortgage acquisition process, including help with documentation and related items. What is a closing disclosure, when will it typically be sent to you, and why does it matter? Here’s everything you need to know about this important document.
Closing Disclosure Basics
When we talk about the closing disclosure, we’re referring to a single document that lays out all of the final terms and numbers associated with your mortgage loan. The closing disclosure will typically be five pages in length, and will include the following details:
- Loan terms: This is where you’ll find information about the interest rate, monthly payments, and other vital terms of your loan agreement.
- Projected payments: Here, you’ll see a breakdown of all of the different types of payments that you’ll be responsible for making over the life of your loan. This will include your principal and interest payment, as well as any taxes, insurance, or other fees that are required.
- Closing costs: All of the different costs associated with acquiring and closing on your loan will be itemized here. This can include fees for things like appraisal, title insurance, or other third-party services.
- Transaction summary: For your reference, this section will provide a summary of all of the different financial transactions that are taking place as part of your home loan. This can include your down payment amount, as well as the total loan amount and any credits that may be applied.
- Other information: The closing disclosure may also include other details about your loan, such as information about escrow accounts or prepayment penalties.
As you can see, the closing disclosure contains a great deal of important information about your home loan.
Timing of the Closing Disclosure
It’s a firm legal requirement that your lender provides you with your closing disclosure no later than three days before your scheduled loan closing date. This is designed to give you sufficient time to review the document and raise any questions or concerns that you may have. In practice, most lenders will provide the closing disclosure much earlier than this – often at least a week in advance, if not more. Why Does the Closing Disclosure Matter? So why is the closing disclosure so important? First and foremost, it’s critical to review this document carefully before you close on your loan. This is your last chance to catch any errors or discrepancies in the loan terms or other information that’s been provided. If something doesn’t look right, be sure to bring it up with your lender so that it can be corrected.
To be clear, even seemingly minor errors like a misspelled name or an incorrect address can cause major problems down the road. It’s always better to be safe than sorry, so take the time to review your closing disclosure thoroughly before you sign on the dotted line.
The closing disclosure is also important because it provides you with a clear understanding of what you’re agreeing to when you close on your loan. There’s no such thing as a “standard” mortgage, and loan terms can vary widely from one lender to the next. By reviewing your closing disclosure, you can be sure that you’re getting the loan that you agreed to, with the terms and conditions that you expected
How to Check the Closing Disclosure
Once you receive your closing disclosure ahead of your mortgage loan being closed out on closing day, it should immediately become one of your top priorities. As noted above, it’s crucial for ensuring the details of your loan are correct, and that all parties have the proper information.
Here are some basic steps for checking your closing disclosure:
- Details first: In most cases, it’s recommended to first move through the simple details of the closing disclosure to ensure they’re correct. Check to make sure no names have been misspelled and that the address of the home being purchased is listed correctly, including the zip code. As mentioned, even small errors in areas like these can have a large trickle-down effect down the line, so it’s important to confirm them – and if they’re wrong, you can quickly send the disclosure back to your lender so it can be corrected before you move to other areas.
- Loan terms: Next up, you should review the entire section on your loan terms and confirm accuracy of each detail. Make sure your monthly payment amounts match with prior documents, for instance, and that your mortgage rate percentage is what you expected it to be. Do not let any errors here slide through the cracks.
- Closing costs: Be sure to move oversee the closing costs as well, confirming they’re accurate. For instance, the document should list the precise amount you’re paying for your down payment, plus any other fees involved in the closing of the home purchase.
- Sending it back: As noted, if any issues or clear errors are present on the closing disclosure, it should be sent back to your lender to be fixed. If no such errors are present, you simply sign the closing disclosure and then return it to your lender, either in-person or virtually.
For more on closing disclosures within your homebuying process, or to learn about our competitive mortgage rates and home loan programs, contact our professional team at Supreme Lending.