The closing disclosure is a five-page document detailing all final costs associated with your home loan. This document is one of many that you will be reviewing and signing at closing.
When you sign, you are committing to all of the conditions presented. So be sure you know what it is that you are signing. Here are four tips for reading and understanding your closing disclosure:
There Are 8 Sections To A Closing Disclosure
There are eight primary sections in your closing disclosure that covers costs and other critical information. Simply put, they are as follows:
- Loan Terms: States all the terms of your mortgage, from how much you’ll pay and for how long.
- Projected Payments: Breaks down all significant components of your loan and how payments will change over the years.
- Costs at Closing: Shows all costs you will pay to your lender during closing.
- Loan Costs: A comprehensive overview of all costs associated with your loan.
- Other Costs: Other payments that can be wrapped up in your mortgage, including taxes and initial escrow payments.
- Calculating Cash to Close: The full amount you will need to bring to closing, and includes seller concessions.
- Summaries of Transactions: A side-by-side view of both borrower and seller costs at closing.
- Loan Disclosures: Shows more detailed information about the conditions of your loan.
Each section thoroughly details all expenses and items to be paid. Review these carefully and compare them against your loan estimate. If something has changed, ask your lender about it before closing.
Understand The Jargon
You will see many terms that you may or may not understand. Each has different meanings in the housing market.
- Escrow: Funds held by a third party to protect all interests in the transaction and dispense those funds when and where they are needed.
- Prepaid items: Items paid by the borrower before closing, including real estate taxes and hazard insurance premiums.
- Earnest money: A good faith deposit of money given to the buyer to show their commitment to purchasing the property.
- Down payment: Money paid upfront on a home, traditionally 20% of the home price.
- PMI: Insurance put on your mortgage that helps protect the lender should you foreclose on the home.
This list is just a small sample of the terms you will encounter when reading your closing disclosure. As always, if you need help understanding, reach out to your lender and your agent at Merchant of Homes. Our professional team
Double Check All Information
Always double and triple check all information on the closing disclosure before you sign! Incorrect information can delay closing. Check:
- Loan number, type, term, and product
- Personal information
- Purchasing home address
- Sale price
Know What You Do & Do Not Have To Pay
Finally, know what you do and do not have to pay at closing. For example, look for seller concessions, or financing costs that the seller agrees to pay to close on the sale. Concessions can include:
- Home repairs
- Inspection fees
- Property taxes
This list is not comprehensive and will vary from seller to seller and state to state. When you begin purchasing a home, work closely with your agent to review what costs to ask the seller to pay for.