What To Expect To See On Your Closing Disclosure
06-02-2022 • MHS Lending
When you purchase a home, you sign a lot of paperwork; It almost becomes a daily ritual. You wake up, grab your coffee, and start e-signing the latest documents from your real estate agent. While most homebuyers don’t read the paperwork they’re signing (who has the time?!), there is one piece of paper that’s worth paying attention to—closing disclosures. A closing disclosure is a statement of your final mortgage loan terms and closing costs. Although your closing disclosures are one of the last checkpoints in your home buying journey, and it may be tempting to breeze through the signatures, it’s helpful to understand each component of the paperwork as it has a significant impact on your financial future. Here’s what to expect to see on your closing disclosure.
The 4 Pieces Of A Closing Disclosure
Your closing disclosure will contain your loan terms, monthly payment information, fees, closing costs, and other pertinent items. Keep reading for all of the details.
In your closing disclosure, the first item to pay attention to is your loan terms. This section will illustrate your total loan amount, interest rate, mortgage payment (principal + interest), and prepayment penalties. If you selected an adjustable-rate mortgage, this section would also discuss how your rate may increase or decrease based on market values.
Another essential part of your closing disclosure is your projected monthly payments. These payments add up to your monthly mortgage payment. Projected payments include the principal, interest, and mortgage insurance (if applicable). Your projected payments will also show your estimated escrow and estimated taxes, insurance, and assessments.
Closing Costs & Fees
Ahhh, fees, there are always fees, right? Unfortunately, not even your home loan is free from fees. In addition to loan terms and projected payments, closing disclosures detail all of the “other” costs of buying a home, including recording fees, transfer tax, and insurance premiums due at signing.
There is a wide range of items that may appear as closing costs, but here are some of the most common:
Credit Reporting Fee
Homeowners Association Transfer Fee
Loan Origination Fee
Lender’s Title Insurance
Prepaid Daily Interest Charges
Private Mortgage Insurance (PMI)
Rate Lock Fee
VA Funding Fee
This applies if you buy a home using a VA loan. Your VA funding fee goes toward administrative costs for the VA loan program. The amount of the funding fee is based on the down payment and whether it’s a purchase or refinance, and whether it’s your first time or repeat purchase.
A quick note on VA funding fees: If you make a down payment of less than 5% on your first home purchase using the VA loan, you would have to pay a funding fee of 2.3% of the total loan amount.
For example, say you decide to put down 3% ($9,000) on a $300,000 home. Your loan amount would be $291,000, and your funding fee would be $6,722.
After listed loan terms, projected payments, closing costs & fees, you will see several other items, including summary tables and other notations.
While all closing disclosures look slightly different, they will all include a “cash to close” summary table, breaking down your costs at closing, including any deposits (i.e., earnest money) you’ve already paid and lender/seller credits. There will also be a summary of transactions, including the home price, closing costs, and the seller’s costs.
Next, you will see a detailed loan disclosure, loan calculations, and other specifics related to your loan.
Closing Disclosure Errors
In the unlikely event that your closing disclosures are incorrect, what should you do?
If you skim through your disclosures and something looks amiss, do not sign the forms! Instead, contact your loan officer as quickly as possible so they can correct the mistake. The faster you contact them, the quicker they can right the wrong, and you can get the keys to your new home.
Did you know that VA Loans are mortgage loans available exclusively to Veterans and military families? And did you know the benefits the VA Loans offer includes $0 down payments, no private mortgage insurance, relaxed credit requirements, and competitive interest rates?
Learn more about our VA loans here.