When Do You Get the Closing Disclosure?
Navigate your home purchase with confidence. Learn to understand and verify the crucial financial details before finalizing your mortgage.
A Closing Disclosure (CD) is a document provided in a mortgage transaction, outlining the final terms of the loan and all associated closing costs. It ensures transparency in the home buying process, focusing on the borrower’s financial obligations. It serves as the definitive statement of the transaction, superseding the prior HUD-1 Settlement Statement for most residential mortgage transactions.
When the Closing Disclosure is Received
The Closing Disclosure is provided by the lender and must be received by the borrower at least three business days before the scheduled closing date. This waiting period allows review of loan terms and costs. A “business day” includes all calendar days except Sundays and federal public holidays. For example, if the CD is received on a Monday, the closing cannot occur until Friday, assuming no federal holidays intervene.
Certain changes to the loan terms can trigger a new three-business-day waiting period. Changes include an increase in the annual percentage rate (APR) beyond 0.125%. A change in loan product, such as switching from a fixed-rate to an adjustable-rate mortgage, necessitates a new waiting period. The addition of a prepayment penalty clause to the loan terms also restarts the three-day countdown.
The Closing Disclosure is delivered electronically or via mail. Lenders must ensure proof of delivery, and the three-day period begins once the borrower has received the document. Borrowers should confirm their preferred delivery method with their lender early to avoid delays.
Key Information in the Closing Disclosure
The Closing Disclosure provides a detailed breakdown of financial aspects related to the mortgage transaction. It presents the final accounting of fees and charges associated with securing the loan and transferring the property.
One section details the loan terms, including the loan amount, interest rate, and total monthly principal and interest payment. It also projects future payments, detailing amounts for principal, interest, mortgage insurance, and escrow.
The CD outlines costs at closing, distinguishing between loan-related and other transaction-related expenses. Loan costs include origination, appraisal, credit report, and title insurance fees, grouped as “lender charges” and “services you can shop for.” Other costs include property taxes, recording fees, and transfer taxes, which can vary by jurisdiction. The “cash to close” figure summarizes the total amount the borrower needs to bring to the closing table.
The Closing Disclosure also includes summaries of transactions for both the borrower and, if applicable, the seller. This section provides an overview of debits and credits for each party, showing how funds are distributed and received.
Steps for Reviewing the Closing Disclosure
Upon receiving the Closing Disclosure, borrowers should undertake a thorough review, comparing it against the Loan Estimate (LE). This comparison ensures the final terms align with what was agreed upon. This review identifies discrepancies or unexpected changes before closing.
Begin by verifying the loan details, such as the loan amount, interest rate, and loan term, to confirm they match the Loan Estimate. Pay attention to the monthly principal and interest payment, ensuring it has not increased unexpectedly. The “cash to close” figure is another item to compare, representing the funds required at closing.
Next, examine all fees and charges listed on the CD. This includes lender credits, which reduce cash needed at closing, and third-party fees like appraisal, credit report, and title insurance. Confirm that these fees are consistent with the Loan Estimate, understanding that some third-party fees have limited tolerance for change. Review escrow account setup details, including initial deposit amounts for property taxes and homeowner’s insurance.
Finally, confirm the loan product type, whether it is a fixed-rate or adjustable-rate mortgage, and check for any unexpected features like prepayment penalties or balloon payments. Verifying all agreed-upon terms, credits, and fees are accurately reflected protects the borrower’s financial interests. Any deviation from the Loan Estimate or unclear item warrants immediate attention.
What to Do About Discrepancies and Delays
If you discover discrepancies between the Closing Disclosure and your Loan Estimate, or errors on the CD, act promptly. Contact your lender or loan officer to clarify concerns or request corrections. Ask questions about any unfamiliar or incorrect line item.
Significant changes to loan terms, such as an increase in APR beyond certain thresholds or a change in loan product, trigger a new three-business-day waiting period. This could delay closing, but is necessary to review revised terms. It is better to delay closing for a few days than to proceed with terms you do not understand or agree with.
If the Closing Disclosure is not received within the expected timeframe, contact your lender. Timely receipt is federally mandated; a delay could indicate an issue. Borrowers should never feel pressured to sign or proceed with closing if they do not understand or agree with the terms.