You’ll go through many steps when you apply for a mortgage, but perhaps the most exciting step is when you receive the Closing Disclosure. Receiving this document means that you are that much closer to being able to close the loan.
What is the Closing Disclosure?
The Closing Disclosure is a required document that you must receive that provides the final details of your loan. On it, you’ll find the terms of your loan, the amount of your projected payments, the amount you’ll need for taxes and insurance, and the total closing costs.
It’s like the finalization of the information you received on your Loan Estimate. At that time, the lender estimated the costs to give you a loan. After underwriting your loan and figuring out all of its parameters, the lender is able to finalize your closing costs on the Closing Disclosure.
When Will You Receive the Closing Disclosure?
You will receive the closing disclosure at least three business days before you close on the loan. This gives you ample time to compare the Closing Disclosure to the Loan Estimate that you received. It also gives you enough time to discuss any discrepancies with the lender without delaying your closing.
The three-day window doesn’t start until you sign the Closing Disclosure, though. Don’t worry, signing the form doesn’t mean that you accept the loan. It’s simply a way to track that you’ve received the disclosure form and have the required minimum of three days to determine if the loan is right for you.
Are There any More Conditions?
With most lenders, once you receive the Closing Disclosure, you are in the clear – the lender is giving you the ‘clear to close.’ The only thing that stands in the way of your closing is any issues that you find with the disclosure.
It’s best if you address the issues with the lender right away so that you can stay on track with the closing, should you still choose to do so.
Once the lender receives your signed disclosure, they will generally start preparing your closing documents, so that you can close on the loan as soon as your three-day window is up.
How to Use Your Closing Disclosure
We recommend that you look at the following details to make sure that you know exactly what you are getting before you close on your loan:
- Make sure the type of mortgage is correct
- Check the loan’s term to make sure it is the same as what you thought
- Look closely at the monthly payment, including the escrow
- Compare the closing costs to those on your Loan Estimate
- Look at the bottom line figure to see how much money you must bring to the closing
If you use the Closing Disclosure appropriately, you can stop any issues right away. For example, if the Loan Estimate showed you paying one point, but the CD now shows you paying 3 points, you have an issue. You shouldn’t wait until the closing to bring this up as this could derail the entire process. Using your three days, take the time to re-negotiate with the lender or at least get clarification before too much time passes.
The Closing Disclosure is meant to help you understand your loan before you get to the closing table. In essence, it means your loan is clear to close, but it also means that you have time to go over the fees on your loan. Make sure your CD matches what you thought you were getting on the loan to ensure that you get the loan you thought you were getting.