What is mortgage closure disclosure?

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Of all the documents required to buy a home, one stands out from the rest: the closing disclosure form.

The final disclosure form is a five-page federal-required document that tells homeowners how much money they need to have on hand to get the keys to their new home. It describes the loan conditions, duration and interest rate… This is one of the most important pieces of information that homeowners receive in the home buying process and should be read carefully.

Professional advice

You will receive a notice that your mortgage is closed at least three business days prior to closing. Read it carefully so you know exactly what to expect.

“The whole point of the final disclosure is for borrowers to cover their backs and make sure they don’t screw up,” says Michael Piazza, initial branch manager at Interstate mortgage… “It’s a huge safety net for them.”

Read on to learn more about mortgage closing disclosures and why it matters.

What is mortgage closure disclosure?

The mortgage closing disclosure is the definitive summary of what you owe for buying a home. It uses actual numbers to let homeowners know what all final costs and fees will look like. There are many fees involved in closing a deal, so a document arriving at least three days in advance serves as a reminder to the homeowner to prepare all the necessary funds.

It also summarizes all the lender’s information about the loan, such as interest rate, term, and estimated monthly installment payments.

“Everything that is said in the final disclosure is important because it is a breakdown of what the borrower is paying,” says Piazza.

When looking for a loan, you will receive a so-called loan appraisal… This is a three-page document that describes the estimated interest rate, monthly payment, and estimated costs to close the deal. When you receive your mortgage closing notice, it may differ from the original loan estimate you may have received. You can take this time to check if something is wrong or not consistent and check with your lender why.

The disclosure of information on the closure of a mortgage loan has become a requirement since 2015 as part of the TILA-RESPA Integrated Disclosure (TRID) Rule… Prior to this, two other documents were provided, which were provided immediately upon closing and gave homeowners little time to familiarize themselves.

What to Expect from a Closing Disclosure Form

Here’s what to expect from this five-page document:

Loan amount and term

The first page shows the loan amount. This is the total loan amount after the down payment and other fees. This section explains how much you will pay and for how long. The interest rate is also indicated, that is, the amount you charge to receive the loan. You will also see any penalties associated with your mortgage, such as a prepayment penalty that some lenders include if you pay your mortgage off completely early.

Fees and payments

The second page details how much this loan will cost. “You’ll find expenses like credit report fees, appraisal fees, and some tax monitoring fees,” says Hari Washington, broker and owner of 1st United Realty & Mortgage.

There is also a section that shows the costs that home buyers can purchase from title and escrow companies, as well as the total amount that borrowers must pay. Other expenses are listed at the bottom of the page, including registration fees, taxes, interest and insurance costs, as well as the total amount. This page also has any mortgage points bought by a home buyer to fix their course.

Closing costs

The top of the third page shows how much money you need to close your mortgage, and then provides a summary of the transactions that have been made so far. Other sections of the page show adjustments already paid, loans payable, and fees.

Closing costs usually ranges from 2% to 5% of the loan amount, ”says Matthew Martinez, real estate broker at Diamond Real Estate Group In California. “At the bottom of the itemized expenses, you will find the closing cash amount, which is the full amount of money you will need to close. The amount shown will be more than your total closing costs because it includes your down payment. ”

Additional Information

The fourth page provides additional information, such as a breakdown of escrow payments over a 12 month period, if required on a mortgage. It also discloses, for example, whether the loan can be transferred to another person, whether installments are allowed, whether payments can be less than the interest due, and whether the lender can demand early repayment.

Mortgage terms

This is a page with big numbers. It shows how much a home buyer will pay over the term of the mortgage, usually 30 years. It breaks down how much money will go towards paying the principal and how much will go towards paying interest.

“It gives you a better idea of ​​what you owe monthly and year after year,” Martinez says. The following is the contact information for the loan.

On the last page, the borrower confirms receipt of the disclosure with his signature.

Why it is important to understand your final disclosure

The mortgage closure disclosure contains all the vital information home buyers need to know before they receive the keys to their new home. Once it is signed, you are blocked.

“You have to understand the disclosure because the other participants in your loan assume you understand it,” says Washington. “You need to know the cost of the loan, the interest rate, the due date and all other aspects of the loan. The lender could offer you all sorts of options, but ultimately the one that will be disclosed will be obligatory. “

Discrepancies between your latest disclosure and the loan valuation

Make sure everything is correct. Double check your name, the address of the house you are buying, the loan description and the loan amount, triple check the interest rate and understand what the fees are. Generally, the largest discrepancy that people see is the difference between the loan estimate and the final disclosure of the amount of taxes due, but other discrepancies are possible.

“If your loan has decreased, your loan cost ratio has changed, or your income is less than expected, your interest rate may change,” says Washington. “The costs of third parties from whom you made purchases, escrow deposits and services that are not required by the lender can increase in any amount. Lender commissions and commissions that you cannot shop for cannot increase at all. Lender’s third party commissions and registration fees may vary by 10%. All of these fees can also change in your favor by any amount. ”

If something is confusing or seems to be wrong, talk to your lawyer or lender to try to clarify it. Contacting them immediately when something is wrong can help avoid delays in obtaining new documents.

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