What Does CD Stand for in Real Estate?

In real estate, “CD” refers to the Closing Disclosure. This document provides a summary of the final terms and costs associated with the mortgage and the overall real estate deal. For both buyers and sellers, understanding the Closing Disclosure is important for confirming the financial aspects of their agreement. It serves to ensure that all parties are fully informed about the transaction’s financial commitments before its completion.

What is the Closing Disclosure?

The Closing Disclosure is a five-page standardized form that outlines the final details of a mortgage loan. Its primary purpose is to provide transparency regarding all costs and terms involved in the real estate transaction. The lender is responsible for issuing this document to the borrower.

This document is mandated by the TILA-RESPA Integrated Disclosure (TRID) rule, which came into effect on October 3, 2015. The TRID rule streamlined the mortgage disclosure process by combining previously separate forms into this single, clear document. This integration helps prevent unexpected charges and ensures borrowers understand their loan terms and associated costs before signing.

Key Sections of the Closing Disclosure

The Closing Disclosure is structured to present a detailed breakdown of the transaction’s financial elements. The first page typically provides an overview, including the loan amount, interest rate, and the estimated total monthly payment. It allows for a quick comparison with the initial Loan Estimate provided earlier in the process.

The “Loan Terms” section specifies the loan amount, the interest rate, and whether these terms are subject to change after closing. It also details the monthly principal and interest payment. Following this, the “Projected Payments” section provides a detailed breakdown of the estimated monthly payment over time. This includes principal, interest, any required mortgage insurance, and estimated escrow amounts for property taxes and homeowner’s insurance.

Costs at Closing

The “Costs at Closing” section outlines both loan costs and other associated expenses. Loan costs encompass fees charged by the lender or mortgage broker, such as origination fees, application fees, and underwriting fees. Other costs include items like appraisal fees, title insurance fees, government recording fees, and prepaid expenses such as property taxes and homeowner’s insurance premiums. This section clearly delineates who is responsible for paying each fee.

Summaries of Transactions

Finally, the “Summaries of Transactions” section provides a comprehensive accounting of the funds involved. It shows the total amount due from the borrower and the total amount due to the seller, including any credits or adjustments.

Receiving and Reviewing the Closing Disclosure

Upon receiving the Closing Disclosure, there is a mandatory three-business-day review period before the scheduled closing date. This period is important for the borrower to carefully examine all the details presented in the document. It provides an opportunity to identify and address any discrepancies before committing to the loan.

During this review period, it is advisable to compare the Closing Disclosure with the initial Loan Estimate that was provided at the beginning of the mortgage application process. This comparison helps in identifying any changes or inconsistencies in the loan terms, interest rate, or closing costs. All figures, including the loan amount, interest rate, and the exact cash needed to close, should be verified against previous agreements.

If any items appear unfamiliar, incorrect, or differ from what was previously agreed upon in the Loan Estimate, it is important to promptly seek clarification. Borrowers should communicate directly with their lender or real estate agent to address any concerns. Ensuring all agreed-upon terms are accurately reflected on the Closing Disclosure helps facilitate a smooth and informed closing process.