UNDERSTANDING THE CLOSING DISCLOSURE FORM
As closing day approaches, buyers are busy doing last minute packing, checking with the movers, making necessary service arrangements, and looking forward to the ritual of passing the keys. But in those final few days before escrow closes, there is important information to be reviewed that could delay the scheduled closing date if the details aren’t accurate.
Under rules administered by the Consumer Financial Protection Bureau (CFPB), the buyers’ mortgage lender must provide them a Closing Disclosure form at least three days before they sign their loan document. This is to make it easier for consumers to locate and understand key information about the transaction, such as interest rate, monthly payments, and costs to close the loan.
The buyers’ real estate agent will want to be sure that the buyers check this form carefully in order to resolve any potential problems and keep that scheduled closing date on track.
Here is a guide to help buyers adequately evaluate the most important information contained in the Closing Disclosure:
- Page one – the spelling of all names and addresses should be verified, and the loan term and type, as well as the loan amount and interest rate, should match those on the most recent loan estimate. The total monthly payment, details of a balloon payment, if any, expected closing costs, and the amount of cash that will be needed to close should also be checked. If there are any discrepancies, the buyers should contact the lender immediately.
- Page two – the Loan Costs and Other Costs, including “Origination Charges” and costs for “Services Buyer Did Not Shop For” and “Services Buyer Did Shop For,” should agree with those shown on the loan estimate and match the costs that the buyers agreed to pay.
- Page three – the “Cash to Close” calculations and “Summaries of Transactions” should be checked for accuracy, and the seller credits must reflect what was agreed upon with the seller.
- Page four – it should be noted how much it will cost if the buyers make a late payment and whether the lender will accept partial payments. Also, will the buyers have an escrow account or are they paying an escrow waiver fee to the lender?
- Page five – the final page contains important loan calculations and other disclosures, including reference to contract terms such as what could happen if the buyers fail to make payments, what a loan default entails, the situations under which the lender can require early repayment of the loan, and the rules for making payments before they are due.
The Closing Disclosure form provides valuable information for buyers. Carefully reviewing those details will help keep the closing on schedule, and help avoid potential surprises to the buyers later on.