What Does the Closing Disclosure Include?

The Closing Disclosure (CD) is a standardized, five-page document outlining the final details of a mortgage loan, including specific terms, projected monthly payments, and a detailed breakdown of all associated fees and costs. It offers a clear overview of financial commitments in a real estate transaction.

Borrowers receive the Closing Disclosure from their lender at least three business days before the scheduled closing date. This three-day period allows time to review final terms, compare them against the initial Loan Estimate, and ask the lender questions before finalizing the loan.

Key Loan and Transaction Details

The initial sections of the Closing Disclosure provide a concise overview of the transaction and the mortgage loan’s primary characteristics, identifying all parties involved (borrower, seller, lender) and the specific property address. The document then details the fundamental financial aspects of the loan, known as Loan Terms. This includes the exact loan amount and interest rate, specifying whether the interest rate is fixed or adjustable.

Following the core loan terms, the Closing Disclosure presents the Projected Payments section. This illustrates the estimated monthly principal and interest payment, often including estimated amounts for mortgage insurance and escrow payments for property taxes and homeowners insurance. These components contribute to the total estimated monthly payment.

Itemized Closing Costs

The Closing Disclosure itemizes all costs associated with the loan and closing process. These expenses are categorized into Loan Costs and Other Costs, offering a comprehensive look at the financial outlay required at closing.

Loan Costs

Loan Costs encompass fees charged directly by the lender or for loan origination services, such as application fees, underwriting fees, and points paid to reduce the interest rate.

Services You Cannot Shop For

Services You Cannot Shop For include costs for services where the lender requires a specific provider, such as appraisal, credit report, and flood determination fees.

Services You Can Shop For

Conversely, Services You Can Shop For represent costs where the borrower chooses their own provider. This category often includes title insurance, pest inspection, survey, and attorney fees, allowing competitive pricing.

Taxes and Other Government Fees

Beyond the direct loan-related expenses, the “Other Costs” section covers additional fees and prepaid items. Taxes and Other Government Fees include recording fees for property transfer registration, and transfer taxes imposed by local or state governments on property sales.

Prepaids

Prepaids are payments made in advance for certain property-related expenses, ensuring future coverage. This can include first-year homeowners insurance premiums, a portion of annual property taxes, and prepaid interest covering interest accrued from the closing date to month-end.

An Initial Escrow Payment at Closing represents the initial deposit into an escrow account, designed to accumulate funds for future property tax and insurance payments. Any remaining expenses are grouped under “Other.”

Summaries of Payments and Cash to Close

The Closing Disclosure includes summaries consolidating the financial aspects of the real estate transaction, culminating in the precise amount of funds required from the borrower at closing.

Summaries of Transactions

The Summaries of Transactions section details the financial flow from both the borrower’s and, if applicable, the seller’s perspectives. For the borrower, this includes amounts due at closing (e.g., purchase price, closing costs) and amounts already paid (e.g., earnest money deposits, lender credits).

Calculating Cash to Close

The Calculating Cash to Close section presents the final amount the borrower must bring to closing. This figure is derived from a systematic calculation beginning with the total loan amount and total closing costs.

Any credits from the seller, such as concessions or repair credits, are factored in, reducing the borrower’s financial obligation. Earnest money deposits already paid are also subtracted. Other adjustments, such as prorated property taxes or homeowners association dues, are incorporated to arrive at the precise cash needed.

Additional Loan Disclosures and Contact Information

The final pages of the Closing Disclosure contain legal stipulations and contact details for all parties involved, providing information that may impact the borrower’s responsibilities and rights throughout the loan term.

Various Loan Disclosures

Various Loan Disclosures inform the borrower about specific mortgage conditions and features. The Assumption disclosure indicates if a future buyer can take over the loan. The Demand Feature clarifies if the lender can require early loan balance repayment under specific circumstances.

Late Payment penalties specify charges incurred if a monthly payment is not made by the due date. The Partial Payments disclosure explains how the lender handles payments less than the full amount due, outlining acceptance or return. The Security Interest section identifies the property serving as collateral for the loan, confirming the lender’s claim in case of default.

Escrow Account disclosure

The Escrow Account disclosure provides specifics about the setup and management of the account for collecting and paying property taxes and insurance premiums. This includes initial deposit amounts and projected balances, providing a comprehensive understanding of the loan’s operational aspects.

Contact Information

The Contact Information section lists names and contact details for all key individuals and entities involved, including the lender, mortgage brokers, real estate brokers, and the settlement agent. This centralized list facilitates communication should questions or issues arise after closing. Finally, the document includes a section for the borrower to acknowledge receipt, confirming review of the Closing Disclosure.