Buying a home is a complicated process, but it’s one that remains a cornerstone of the American dream. Most people hope to eventually own their own place, whether that property is a cabin in the woods or a penthouse condo in a downtown setting. You may think that securing a mortgage and finding the right place means that the worst is behind you, but you’ll still have to make it through the closing and document signing process.
There are many confusing factors involved in signing for a home. One common complaint is confusion about a required government form, the Closing Disclosure. Previously, homeowners received a document called the HUD-1 settlement statement. After changes to federal law, mortgage packages now include a similar form, called the Closing Disclosure. Many soon-to-be homeowners find themselves utterly baffled by this document.
The Closing Disclosure offers you financial transparency
Mortgage brokers and big lenders are notorious for sneaking in extra fees and costs. With so many pages of fine print, you could feel overwhelmed and unable to make sense of it all. Thankfully, in order to prevent lenders and other real estate professionals from unethical profit-driven practices, the government requires a Closing Disclosure for every home closing and refinancing transaction.
The Closing Disclosure provides a complete and accurate breakdown of every single cost associated with your mortgage. It is a five page document with all of the details about your loan and every disbursement made from the principle. The Closing Disclosure will also contain the details of your loan, such as your monthly payments, interest rate and other important terms. This form will also disclose all closing costs, from an assessor’s fee to your title insurance premium.
You have at least 3 days to review your Closing Disclosure
Trying to make sense of all of those financial figures at the document signing would prove difficult. Notaries and title offices often schedule back-to-back signings. You simply won’t have the time to thoroughly examine those figures. To prevent any kind of duplicity related to that inability to fully review documents at signing, your lender should provide the Closing Disclosure at least three days prior to your signing.
When you receive initial approval for a mortgage, your lender will provide you with a Loan Estimate that outlines costs for the mortgage. Make sure that you familiarize yourself with those figures. You can then compare the Loan Estimate with the Closing Disclosure to ensure that the terms of your final loan are close to what you initially agreed to with the lender. If you find something you don’t understand or if the final costs or terms are different from what you expected, you should call your lender right away.