What You Need to Know About the New Closing Disclosure Form

A closing disclosure form simply outlines the terms and costs of your mortgage, but it’s one of the most important pieces of paperwork to check before closing on a home.

Look at the closing disclosure form as a follow-up form to the loan estimate document you received when you first applied for your loan. The loan estimate outlined the approximate fees you would need to pay if you chose to move forward with the lender. Your closing disclosure is the real deal version of that. So, it’s important to scrutinize and look over the closing disclosure form very carefully.

Here are a few tips to help you when you look over your closing disclosure form:

Closing disclosure vs. settlement statement 

The closing disclosure form used to be called a settlement statement. But, more has changed than just the name. Before the settlement statement became the closing disclosure, it was a really long and confusing document that was only required to be distributed to homebuyers on the day of closing, which didn’t give them much time to look over the form and address any issues. Now, the closing disclosure is required to be distributed to homebuyers three days before closing, and the information is all packed into a five-page document.

Compare your closing disclosure with your loan estimate

It’s smart to compare your closing disclosure with your loan estimate while checking for any issues. Most of the numbers and terms should match up or be extremely close, but keep in mind that some may change because weeks or even months may have passed since you applied for your loan. If you didn’t lock in your mortgage interest rates, these rates may have changed.

If there are certain changes that are troubling you, make sure you notify your lender and title or closing company right away. You only have three days to address any issues before closing, so it’s important to act fast. Sometimes, the closing can be postponed so that a new closing disclosure can be sent out with a new three-day review period.

What to check on your closing disclosure form

You need to triple-check your closing disclosure form to make sure everything’s accurate, but here’s a list of things to pay close attention to:

• The spelling of your name: Minor misspellings can create big problems later, and although it may not seem like it, small errors like this are extremely common.
• Loan term: This is how long your home loan will last. Typically, loans last 15 or 30 years, so you want to make sure this is accurate.
• Loan type: There are so many types of loans. Conventional loans typically come with a fixed interest rate or an adjustable-rate mortgage where rates remain the same for only a certain number of years.
• Interest rate: You definitely want to make sure this is right, and if you locked in your rate, it should remain the same.
• Cash to close amount: This is how much money you need to bring to be able to close the deal, which includes your down payment and closing costs. Home buyers usually pay the remainder of the funds through a cashier’s check or wire transfer.
• Closing costs: These fees go to the third parties to facilitate the sale of the home. If significant changes to your closing costs have been made from your loan estimate, make sure you ask your lender why. Typically, homebuyers can expect typical closing costs to be about 3 or 4 percent of the home’s sale price.
• Loan amount: If this number increased since your loan estimate, it could be because the closing costs have been rolled into your loan. This reduces your upfront costs but adds to your overall costs because, over the life of the loan, you’ll pay added interest.
• Estimated total monthly payment: This is normally what home buyers are most concerned about, but this is still only an estimate. Your monthly payment can change over time due to certain things, like, for example, if the interest rate on your adjustable-rate mortgage increases after the introductory rate expires. With this, you just need to make sure you’ll be able to comfortably afford to pay your monthly loan payment despite the possibility of fluctuation.
• Estimated taxes, insurance, and other payments: This amount can also change over time. If your property taxes or homeowner’s association dues increase, this amount will also increase.

When it comes to looking over your closing disclosure form, the best advice is to pay close attention to even the smallest details and always ask questions if you have any. Your loan officer or real estate agent should be able to give you a line-by-line explanation of the form if you need it.