Navigating the Closing Disclosure: A Comprehensive Guide for Home Buyers

Introduction: When you embark on the journey of purchasing a home, one of the most crucial steps involves reviewing the Closing Disclosure document. This standardized five-page document is a legal requirement for your mortgage lender to provide you with at least three business days before closing. It outlines the final terms of your mortgage loan, including the interest rate, term length, monthly payments, and closing costs. This article will guide you through what a Closing Disclosure is, why it matters, what to expect in the document, and how to review it carefully before signing the loan documents.

What is a Closing Disclosure? A Closing Disclosure is a comprehensive document that breaks down the details of your mortgage and monthly payments. It provides an itemized list of your closing costs, giving you a clear understanding of what you will be paying for during the closing process. While it is similar to the Loan Estimate you received earlier in the process, it includes more finalized terms and serves as a final opportunity to question or negotiate costs before closing.

Why do Closing Disclosures matter? Your Closing Disclosure is a crucial document that allows you to review all the terms and expected expenditures before your settlement. It gives you time to compare the information with the numbers on your Loan Estimate, ask your lender questions, and confirm that all your paperwork is in order. Before the Consumer Financial Protection Bureau (CFPB) began requiring a Closing Disclosure in 2015, home buyers were sometimes caught off guard by the costs and terms they didn't understand or expect to pay. The Closing Disclosure ensures that you are fully informed and can make informed decisions about your mortgage loan.

How many days after a Closing Disclosure can a borrower sign the loan documents? Your lender is legally required to give you a Closing Disclosure at least three business days before your scheduled closing date. You must acknowledge receipt of the Closing Disclosure to show that the lender complies with the three-day rule. After reviewing the Closing Disclosure, you should notify your lender if any changes need to be made. If significant changes are made, the lender will need to issue a new Closing Disclosure, which must also be received three days prior to your settlement. This could push back your closing date, so it's essential to review the document thoroughly and promptly.

What is in a Closing Disclosure? A Closing Disclosure includes the following information:

• Loan terms: This section outlines the interest rate, term length (e.g., 30-year fixed-rate), and monthly payment amount.
• Closing costs: This section provides an itemized list of all closing costs, including fees charged by your lender, title insurance, property taxes, and more.
• Loan-level price adjustment (LLPA): This section explains any adjustments made to your interest rate or loan amount based on factors such as credit score or appraisal value.
• Prepaid items: This section outlines any prepaid items such as interest or property taxes that are due at closing.
• Total of loan estimate: This section summarizes the total amount of your loan estimate, including principal, interest, and fees.
• Additional disclosures: This section includes any additional disclosures required by law or by your lender.

What to check in your Closing Disclosure: When reviewing