Mortgage Closing Disclosure

The mortgage closing disclosure is a document that makes the home-buying or refinancing process more transparent. You will receive the mortgage closing disclosure document a few days before closing and should know what to look for to ensure that closing goes smoothly.

WHAT IS THE PURPOSE OF A MORTGAGE CLOSING DISCLOSURE?

Under the Truth in Lending Act and the Real Estate Settlement Procedures Act of 1974, lenders must legally release a five-page statement outlining the loan terms and other important details at least three days before closing.

This form helps you understand your loan terms, closing costs, and other fees. If you disagree, you have three days to contact your lender and request a change.

WHAT’S ON YOUR MORTGAGE CLOSING DISCLOSURE?

The following items can be found on your disclosure.

LOAN TERMS

This section lists the total amount of the loan. Make sure it matches the buying price and accounts for any down payment.

Next, you’ll find your interest rate, which should match the rate you locked.

The disclosure also lists your monthly interest and principal payments. These final numbers should be in the same range as your loan estimate.

Most mortgage products need these features. Still, the loan term section has information about prepayment penalties and balloon payments, if applicable.

PROJECTED PAYMENTS

This section breaks down your monthly payments. Here’s what it should include:

• Principal and interest payments
• PMI, which should be between 0.22 and 2.25% of the loan value
• Escrow, including property taxes and home insurance premium

CLOSING COSTS

This section summarizes the fees you have already paid and the cash you’ll need to bring at closing. It usually includes:

• Your down payment
• The loan origination fee
• Additional costs if you’re buying points
• Any credits from the lender
• The recording fee for the deed

The costs you already covered can include the inspection, appraisal, and title insurance policy.

Most lenders expect you to put enough money in escrow to cover PMI, homeowner’s insurance, and property taxes for up to six months. You’ll see this amount under the section outlining the cash to bring at closing.

CLOSING AND LOAN INFORMATION

Lastly, your disclosure will have practical information about closing, including the date, the sale price, and details about the property.

Make sure the contact information for the borrower, seller, and lender is accurate, and double-check your loan type and loan ID number.

COMPARING WITH YOUR LOAN ESTIMATE

The loan estimate is a form the lender issues after you apply for a mortgage. This form shows your estimated interest rate, monthly payments, and closing costs. These amounts will likely change, but there should only be significant discrepancies if your credit score or financial situation changes.

Legally, lender fees, transfer taxes, and any service you didn’t get to shop for can stay the same. Recording fees and third-party services the lender recommends can increase by 10%. However, there is no legal protection if insurance premium and benefits you shopped for on your own change.

You should review the disclosure as soon as you get it, ask questions about any changes, and submit a written request if you run into any issues.

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