When you’re buying a home and applying for a mortgage, there are many important documents you’ll need to understand. One of the most critical is the closing disclosure, which is provided to you before you close on your home.
What is a Closing Disclosure?
A closing disclosure is a document that provides important details about your mortgage loan, including the loan terms, projected payments, and closing costs. It’s a five-page document that’s required by law to be provided to you three days before your closing date.
The closing disclosure is designed to help you understand the costs associated with your mortgage, including any fees charged by the lender, title company, or other third parties. By reviewing this document, you can ensure that you’re getting the best possible deal on your mortgage and that there are no surprises at closing.
What Information is Included in a Closing Disclosure?
The closing disclosure contains a lot of important information about your mortgage loan, including:
Loan Terms: This section includes the loan amount, interest rate, and the length of the loan. It also includes any prepayment penalties, balloon payments, and whether the loan has an adjustable rate.
Projected Payments: This section provides an estimate of what your monthly mortgage payment will be, including principal, interest, and any mortgage insurance or escrow payments.
Costs at Closing: This section provides an estimate of the closing costs you’ll be required to pay, including fees charged by the lender, title company, and other third parties.
Loan Costs: This section provides a breakdown of the fees charged by the lender, including origination fees, application fees, and appraisal fees.
Other Costs: This section provides a breakdown of other costs associated with the mortgage, including title insurance, recording fees, and prepaid taxes and insurance.
Comparisons: This section compares the loan terms and costs to the initial loan estimate you received from the lender, helping you identify any changes or discrepancies.
How to Read a Closing Disclosure
Reading a closing disclosure can be overwhelming, especially if you’re not familiar with the terminology. However, it’s important to take the time to review this document carefully to ensure that you’re getting the best possible deal on your mortgage.
Start by reviewing the loan terms, including the loan amount, interest rate, and length of the loan. Make sure that these match what you were expecting based on your conversations with the lender.
Next, review the projected payments to ensure that you can afford the monthly payment, including any mortgage insurance or escrow payments.
Finally, review the closing costs carefully, including the fees charged by the lender, title company, and other third parties. Make sure that you understand each fee and why it’s being charged.
If you have any questions about the closing disclosure, don’t hesitate to ask your lender or real estate agent for clarification. It’s better to ask questions now than to be surprised by unexpected fees or costs at closing.
In conclusion, the closing disclosure is a critical document that provides important information about your mortgage loan. By reviewing this document carefully, you can ensure that you’re getting the best possible deal on your mortgage and that there are no surprises at closing. Call Abo Capital today to discuss your real estate venture at (310) 984-8028, we’ve helped thousands navigate the lending process for over 35 years.