What Does a Closing Disclosure Look Like?

A Closing Disclosure (CD) is a standardized document central to real estate transactions, providing transparency regarding the final terms of a mortgage loan and all associated costs. It serves as a comprehensive financial summary, outlining the loan amount, interest rate, monthly payments, and various fees. This document helps individuals understand their financial commitment before finalizing a home purchase or refinance.

Purpose and Key Elements

The Closing Disclosure presents a comprehensive, final summary of loan terms and closing costs. Lenders must provide this document at least three business days before the scheduled closing date. This waiting period allows borrowers to review the document thoroughly, compare it against the initial Loan Estimate, and identify any discrepancies. This measure prevents last-minute surprises and ensures borrowers can ask questions before signing. The CD replaced older forms, standardizing the process for clarity.

Initial Loan and Transaction Details

This section provides an overview of the loan and transaction details. It displays core loan terms, including the loan amount, interest rate, and monthly principal and interest payment. The CD also provides projected payment schedules, including estimated escrow payments for property taxes and homeowner’s insurance. Key transaction information, such as the property address, loan term, and loan type, is also summarized.

Itemized Closing Costs

The Closing Disclosure provides a comprehensive breakdown of all fees and charges associated with securing the mortgage and completing the property transfer. These costs are typically categorized into “Loan Costs” and “Other Costs.” Loan Costs include fees charged directly by the lender or mortgage broker for processing the loan, such as origination charges, which may encompass application fees, underwriting fees, and any discount points paid to lower the interest rate.

This category further delineates services the borrower did not shop for, which are third-party services required by the lender where the borrower could not choose the provider. Examples commonly found here include appraisal fees, credit report fees, and flood determination fees. Conversely, “Services Borrower Did Shop For” lists fees for services where the borrower had the option to select their own provider, such as pest inspection, survey fees, or certain title services.

“Other Costs” encompass various expenses not directly tied to the loan itself but necessary for the transaction. This includes taxes and other government fees, such as recording fees paid to the local government to officially register the property deed and mortgage, and transfer taxes, which are assessed on the transfer of property ownership. Pre-paid items are also listed, covering expenses paid in advance, like initial homeowner’s insurance premiums, pre-paid interest for the period between closing and the first monthly payment, and often a portion of property taxes.

The initial escrow payment at closing is another significant “Other Cost,” representing funds deposited into an escrow account to cover future property taxes and insurance premiums. Other miscellaneous costs might include homeowners association (HOA) fees or home warranty charges. The itemized nature of this section allows for a clear comparison against the Loan Estimate, helping borrowers understand how final costs align with initial projections.

Calculating Cash to Close

The Closing Disclosure consolidates all financial elements to arrive at the final “Cash to Close” amount, which is the total funds a borrower needs to bring to the closing table. This calculation begins by summarizing the borrower’s transaction, detailing all debits and credits. Debits represent amounts owed by the borrower, such as the total closing costs and the down payment. Credits include amounts already paid, like earnest money deposits, and any seller credits or adjustments negotiated as part of the purchase agreement.

The document also presents a “Summaries of Transactions” section, which offers a side-by-side comparison of the financial flows for both the borrower and the seller. This summary illustrates how the loan amount, along with all costs and credits, contributes to the final cash required from or due to each party.

Additional Loan Information and Confirmations

This section provides further details about the loan’s characteristics and borrower responsibilities. It clarifies whether the loan is assumable, meaning if a future buyer could take over the existing mortgage terms. It also indicates the presence of a “demand feature,” which would allow the lender to demand full repayment of the loan at any time under specific conditions. Policies regarding late payments, including any associated fees or penalties, are clearly outlined.

Information concerning the escrow account details what expenses (like property taxes and homeowner’s insurance) will be paid from it and how the account will be managed. The “Loan Calculations” section provides important metrics, such as the total of payments over the loan’s life, the finance charge (total dollar amount the loan will cost), the Annual Percentage Rate (APR), and the Total Interest Percentage (TIP), indicating the total interest paid as a percentage of the loan amount. Finally, the document includes contact information for all parties involved in the transaction and a confirmation of receipt for the borrower to acknowledge.