You’re about to sign a mortgage loan. It’s a major financial commitment. You may be wondering what exactly you’re getting into…

The Closing Disclosure is all about making sure you have a really clear answer to that question, so you can close on your new home with no worries about the fine print!

Required by federal law for all home purchases, this core mortgage document itemizes the final terms of your loan in a straightforward, organized way. Every number is right there. It’s based on, and refers to, another federally required form, the Loan Estimate that you got when you first applied for your loan.

But how do you read the Closing Disclosure? Five pages! What does it all mean? To help you get oriented, we’re going to walk you through the six big-money numbers.

We will get the Closing Disclosure to you at least three business days before you close on your home
•  It’s your responsibility to review the Closing Disclosure and ask questions about anything you don’t
   understand (And please ask us – we are here to help!)
•  It’s our responsibility to get the numbers right
•  By law, the terms and most of the numbers should be the same or close to those on your original
   Loan Estimate
•  If something changed that shouldn’t have, and you don’t realize it before closing, you have up to three
   years to cancel your loan
•  It’s a notice, not a contract, but you might be asked to sign it, or a form acknowledging that you got it

Now here are the six big-money numbers and where to find them. Note that the info in the Closing Disclosure is organized under black “tabs,” which we refer to in each section below. Again, don’t hesitate to go to your loan officer or closing agent with questions!

This figure is top of mind for most homebuyers, so you might want to jump right to it and end the suspense — although you shouldn’t be too surprised. It includes your down payment and all closing costs. Since you need to either get a certified check or do a wire transfer, you need to know the exact amount ahead of the closing so you can get to your bank.

Where to find it:

•   Page 1, Costs at Closing tab
•   Page 3, Calculating Cash to Close tab

The total loan amount is the purchase price minus your down payment, plus any closing costs you might be folding into the loan. If your down payment is small and you’re financing your closing costs, the amount you’re borrowing could be bigger than the price of your home.

Where to find it:

•   Page 1, Loan Terms tab, Loan Amount

This one is big in the sense of important. Hopefully, you locked in your interest rate when you applied for your loan. If so, it should be the same as it was on the Loan Estimate — unless the lock has expired, which can happen if it takes a long time to close.

Where to find it:

•   Page 1, Loan Terms tab, Interest Rate
•   Page 1, Loan Terms tab, “Can this amount increase after closing?”

It’s important to understand this. Thanks to many years of interest, you’ll ultimately pay way more for your home than the purchase price. The Closing Disclosure shows you exactly how much, assuming that you make all your payments on time, in the scheduled amounts.

The good news is that you can potentially save a huge amount on interest if you make extra payments on principal, especially in your early years of homeownership.

Where to find it:

•   Page 5, Loan Calculations tab, Total of Payments

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By now, you are probably familiar with the components of your monthly mortgage payment: principal, interest, taxes, and insurance (PITI). The Closing Disclosure breaks your payment into just three parts:

•   Principal and interest
•   Mortgage insurance if you need it
•   Estimated escrow
 

Your escrow account is a long-term account established by your lender at closing. It holds the portion of your monthly payment that goes toward annual property taxes, mortgage insurance, and sometimes homeowner’s insurance. Because taxes and insurance premiums change, the Closing Disclosure can only estimate this figure.

Where to find it:

•   Page 1, Projected Payments tab

What if something doesn’t make sense?

Bring it to our attention right away. Like we said, mistakes do happen, but we are here to make sure that everything is correct and that you are comfortable with everything about your loan.

If you are ready to buy or refinance your home, get in touch with one of our loan officers today at 502-585-5626 or visit our website here! Now that you understand a Closing Disclosure, you can be confident in your closing

Here is a full sample of the first page of a Closing Disclosure.