If you’ve ever purchased a home, you know the mortgage loan process can involve a variety of documents and fees, and keeping up with them can be a real challenge. How can you be sure that you are paying the agreed-upon fees and aren’t being over-charged? The answer is a closing disclosure, which is a five-page form provided to you by your lender three days before your closing.
The closing disclosure is overseen by the Consumer Financial Protection Bureau and replaced in August 2015 the much longer and more confusing HUD-1 settlement statement. The purpose of the closing disclosure is to give you details about your loan, including key terms, how much you are paying in fees, and other costs associated with your mortgage. Here are some things you should check on the closing disclosure according to the CFPB to make sure it matches your expectations:
- Does your loan term, amount, purpose, product, estimated total monthly payment, closing costs, cash to close, and loan type match your most recent loan estimate?
- Does the Interest rate match what is on the loan estimate?
- Does your loan have a prepayment penalty?
- Does your loan have a balloon payment?
- Do you have items in estimated taxes, insurance and assessments that are not in escrow?
- Is “Services Borrower Did Not Shop For” similar to what was shown in your loan estimate and match what you agreed to pay?
- Does the Seller Credit reflect what you agreed upon with the seller?
- How much will it cost if you make a late payment?
- Will your lender accept partial monthly payments?
- How much cash will you need at closing?
- Will you have an escrow account? And if not, are you paying an escrow waiver fee to the lender?
- What is the total amount of interest the loan will cost?
Taking the time to read and understand the closing disclosure is imperative to make sure you fully understand the terms and conditions of your mortgage loan. Comparing your loan estimate to the closing disclosure will highlight discrepancies you can address with the lender before the paperwork is signed, and you can rest easier knowing that your terms are correct.
If you have more questions about how to understand a closing disclosure, please contact the mortgage experts at NASB, at 855-465-0753.