The Closing Disclosure is a critical document that summarizes the final terms and costs of a mortgage. Issued by the lender at least three days before the scheduled closing of a home purchase, it provides a comprehensive overview of the loan you are about to finalize. This document details the loan amount, interest rate, monthly payments, and a breakdown of closing costs. It also outlines other fees such as the appraisal, title insurance, and government recording costs.
Comparing the information in the Closing Disclosure with the Loan Estimate you received at the start of the application process is crucial. This comparison helps ensure that you understand any changes in the terms or costs since the initial estimate. Confirm that the numbers align with your expectations, and inquire about any discrepancies.
The disclosure is divided into several sections:
- Loan Terms: Lists the principal amount, interest rate, and whether it can change after closing. Includes monthly principal and interest payments.
- Projected Payments: Shows the month-by-month breakdown of payments over the life of the loan, including when interest rates might adjust if you're dealing with an adjustable-rate mortgage (ARM).
- Costs at Closing: Summarizes the total cost required, including closing costs and the cash you need to bring.
- Loan Calculations: Offers insight into the long-term expenses of the loan, including total payments, finance charges, and APR.
- Other Disclosures: Provides information about the possibility of future reassessments, such as tax and insurance considerations.
By thoroughly reviewing the Closing Disclosure, you can ensure you fully understand the financial commitment you are making and clarify any final details before closing the loan.