As of June 25, 2018, we’ve made some changes to the way our mortgage approvals work. You can read more about our Power Buyer ProcessTM.
Imagine that you’re nearing the closing of your home loan. And what a process it has been– preapprovals, house hunting, income verification, inspections, appraisals and so much more. For some, the amount of paperwork feels daunting. But if you’ve prepared a bit of ahead of time, while the document shuffling can still feel excessive, you’ll keep a cooler head while your eyes stay on the prize of the American Dream.
Having said that, avoid letting the wheels come off at the last minute, especially as your loan closing nears. Closing a home loan can be a whirlwind activity, with a frenzy of dozens of documents to be signed and verified, and instructions on each one coming in from lenders and lawyers with the verbal rapidity of an auctioneer.
Each document is significant, based on its own role in the loan package. A prime example is the Closing Disclosure. There are numerous documents, spread between real estate agents, lenders and appraisers, but the Closing Disclosure is one the big dogs you’ll encounter when it comes to closing day.
This is not to be confused with the Loan Estimate, a three-page document covering general information about the loan and property. While not part of closing documentation, the Loan Estimate breaks down your closing costs into a detailed explanation of origination charges (to cover lender expenses), third-party charges like taxes and homeowners insurance, and the estimated amount of cash needed at closing.
So, what exactly is the Closing Disclosure ? It technically covers the same points as the Loan Estimate, but includes additional information regarding the escrow component of your loan. To understand the Closing Disclosure is to know what escrow is. Escrow is money that your mortgage lender puts into a separate account that pays your future property taxes and insurance costs. It’s common to have escrow with a mortgage, but isn’t always necessarily required.
Kim Dawson is president of North Carolina-based NC REALTOR®, and has more than 15 years’ experience in the market. She has advice for future homeowners once they get their hands on the Closing Disclosure.
“The most important thing to be aware of is to receive and sign it three days before closing, which is required as part of the new Dodd-Frank guidelines,” Dawson said. “If it is not signed and returned to the lender within that time frame, the closing will be delayed.”
And this is quite possibly the most significant part of the Closing Disclosure. It’s one thing to understand the terms outlined in it – which should be pretty familiar because you’ve likely discussed this already with your real estate agent – but it’s just as important to understand the details as it is to promptly sign it. The last thing anyone wants or needs is a surprise delay arising at the closing.
Understanding the terms of the Closing Disclosure will help lessen concerns before going to the closing. Dawson suggests some other tactics to keep the closing process smooth and efficient.
“More and more closing attorneys are requiring closing funds/down payments to be wired,” Dawson said. “So it is important to know ahead of time the closing attorney requirements. When reviewing the statement, you should be contacting your lender with any questions.”
Hopefully, a seamless home loan closing is a reality when you understand the Closing Disclosure (and what funds will be necessary to bring to the closing). For additional questions, contact your lender.
If you have any tips for better understanding a Closing Buyer Statement, please leave a comment below!
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