Purchasing Guide - Closing Disclosure

This is the most important step in buying your home.  Three days before closing, you will receive a Closing Disclosure.  It is a five-page document outlining the terms and details of your purchase.  Upon receipt, you have three days to sign your closing documents. This will be your closing day. 

The disclosure form includes: 

• The loan term, amount, interest rate, monthly principal and interest.  You may have a prepayment penalty.  Depending on your loan, a balloon payment may be detailed. 
• Your projected payments consisting of principal, interest, mortgage insurance (for less than 20% down on a home), and escrow used for insurance and taxes.  Your monthly payment will be estimated.  HOA fees may be included. 
• Your closing costs are broken down and itemized. You can expect closing costs to be from 2% to 5% of your loan amount.  
• Your loan costs consist of a possible loan origination fee of approximately 1% of your loan, any mortgage points owed to reduce your interest, the application fee, the underwriting fee, lender service fees, and service fees you ordered. 
• There may be other costs, such as transfer taxes and recording fees, prepaid costs and premiums, initial escrow payment at closing, and miscellaneous fees related to an HOA, home inspection, home warranty, real estate commissions, and title insurance. 
• Your cash-to-close amount is your down payment plus total closing costs and will be due on closing day. 
• A side-by-side view of your costs versus the seller's costs. The summaries of transactions outlines who pays for what. 
• Loan disclosures detail the policies of the loan during its lifetime.  It may explain whether your loan is assumable, has the option for the lender to demand the full price at any time, what happens with partial or late payments, and whether your loan is allowed to negatively amortize. The lender will also declare they have the right to take and sell your home if you fail to make payments.  If you are using an escrow account to facilitate your loan, that will be described as well.  
• Your loan calculations will describe how much your loan will cost over its life, including finance charges, interest rates, and total interest percentage. 
• Finally, your contact information will be reviewed and you will need to sign that you received the disclosure form. 

Compare your loan estimate you received shortly after you applied for the loan with the Closing Disclosure form.  If there are errors or drastic changes, you will want to contact the lender to remedy the differences.  If successful, you will receive another disclosure.  At that time, if you understand and accept the information, then you will sign it.  Once signed, the details of the closing disclosure cannot be changed.