When you finance the purchase of a home through a mortgage loan, there are strict regulations governing how lenders do business and what they must explain to you. A lender is required to give you the closing disclosure at least three business days before you finalize the mortgage loan. This five-page form provides critical information about the loan and your obligations.
The closing disclosure form is rich with facts and figures about the transaction. Although it can seem overwhelming, it is actually organized in a way that makes the details clear. Here is an overview of the form’s contents:
- Page 1 — This initial page includes the names and addresses of all parties to the transaction, the identity of the property and the sale price. After a listing of the length and type of loan, there are page sections on loan terms, projected payments and costs at closing. The total cash needed to close the transaction is also stated.
- Page 2 — Here you will find a detailed breakdown of the closing costs summarized on Page 1. Loan costs include origination charges, “services borrower did not shop for” (such as the home appraisal fee) and “services borrower did shop for” (such as survey and title company fees). Other costs include broker commissions, taxes, inspection costs and homeowners’ insurance.
- Page 3 — At the top of the page is a detailed description of cash needed at closing, taking into account adjustments, credits and outstanding costs. Next comes a summary of the buyer’s and the seller’s responsibilities in the transaction, showing payments or deposits already made and amounts to be paid at closing.
- Page 4 — This page lays out the mortgage loan’s terms and conditions, including late fees and whether partial payments will be accepted. There is also a description of your loan’s escrow account that may be set up to pay for homeowner’s insurance and property taxes.
- Page 5 — This final page starts with a summary of the mortgage loan, including finance charges, annual percentage rate and total amount of principal, interest and other costs to be paid over the life of the loan. Further disclosures are made about your rights and responsibilities as a borrower, including what may happen in case of foreclosure. The page then lists the lender, settlement agent and any brokers and gives their contact information.
The three-day review period gives you time to compare your final terms and costs to those in the original loan estimate. It also gives you the opportunity to ask questions and take action regarding possible discrepancies. With the aid of an experienced real estate attorney, you can make sure that all financial terms of the transaction are correct, so that there will be no surprises at the closing.
Based in Miami, Norma Echarte & Associates represents buyers and sellers in real estate transactions clients throughout South Florida, including Fort Lauderdale, West Palm Beach and Boca Raton. Please call 305-501-2844 or contact us online to schedule a meeting.