What is a Closing Disclosure?
The Closing Disclosure (CD) is a standardized, five-page form that replaced the HUD-1 and Truth in Lending Act (TILA) disclosures. It provides consumers with the final details of their mortgage loan transaction, including the loan terms, projected monthly payments, and itemized closing costs.
Key Information Found on a Closing Disclosure:
- Page 1: Includes the loan terms (interest rate, monthly payment), loan details (loan amount, loan ID), and borrower/lender information.
- Page 2: Details closing costs, including lender fees, title insurance fees, prepaid items (like property taxes and homeowners insurance), and owner’s title insurance.
- Page 3: Summarizes the cash to close, provides calculations for closing costs, and outlines any outstanding loan balances.
- Page 4: Includes lender points and other “](other)” costs.
- Page 5: Contains settlement service provider information, loan calculations, and comparisons.
Why is the Closing Disclosure Important?
The CD is crucial because it allows borrowers to review all the terms and costs associated with their mortgage before closing. Lenders are required to provide the CD to borrowers at least three business days before the scheduled closing, giving them ample time to ask questions and ensure everything is accurate.
Comparing the CD to the Loan Estimate (LE) received earlier in the process helps identify any significant changes in fees or loan terms. This transparency is vital for making an informed decision about the mortgage.
Sources:
- Consumer Financial Protection Bureau (CFPB)