The homebuying process can be both exciting and overwhelming—especially for new homeowners who have never done it before. After all, there is a lot of paperwork to read! One crucial document that every prospective homebuyer should become familiar with is the closing disclosure. The closing disclosure outlines the final terms and costs of your mortgage, ensuring there are no last-minute surprises. In this comprehensive guide, our team of experts at American Home Loans in Sandy, Utah will walk you through what a closing disclosure is, how it functions, and what you can expect during this step of the mortgage process.
What Is A Closing Disclosure?
A closing disclosure is a comprehensive five-page document provided by your mortgage lender that details the final terms and costs associated with your mortgage. It includes important information such as the loan terms, projected monthly payments, fees, and closing costs.
Receiving this document is a significant milestone in the homebuying process, but you might wonder, ‘Does closing disclosure mean the loan is approved?’ While it indicates that you are very close to final approval, it doesn’t necessarily mean that your loan has been approved. Typically, the final loan approval is contingent upon your review and approval of the terms listed in the closing disclosure.
Settlement Statement vs Closing Disclosure
Settlement statements and closing disclosures serve similar purposes but are used in slightly different contexts. A settlement statement (sometimes referred to as a HUD-1 statement) outlines all the fees associated with the transaction for both the buyer and the seller. This document lists each party’s costs and credits, providing a clear picture of the financial aspects behind the home loan for the sale.
In contrast, a closing disclosure is specifically used for residential real estate transactions involving a mortgage. This five-page document is provided by the lender and focuses on the borrower’s side of the transaction, and what it means for them—i.e. mortgage rates, terms, monthly payments, etc.
What Is A Typical Closing Disclosure Timeline?
A mortgage lender must provide you with the closing disclosure at least three business days before the scheduled closing date. This is a critical federal requirement designed to give you time to review the final terms and costs. During these three days, carefully review the document. Compare it to the Loan Estimate to check for discrepancies or unexpected changes and address any questions or concerns with your lender immediately.
What Triggers a New 3-Day Waiting Period for Closing Disclosure?
If any issues are identified during your review of the closing disclosure, your lender may need to make corrections. If significant changes are required, a new three-day review period may be triggered, starting the process over again.
What Happens After Closing Disclosure?
Once the three-day review period is complete and all terms are agreed upon, you proceed to the closing. You will sign the final loan documents, pay any remaining closing costs, and make your down payment! Home sweet home is close, we promise!
Who Pays Closing Costs?
Closing costs can be paid by both the buyer and the seller, depending on the negotiation specifics. Generally, buyers are responsible for the bulk of the closing costs, which include fees for the loan origination, appraisal, title insurance, home inspections, etc. Sellers typically cover the real estate commission fees and sometimes contribute to closing costs to make the deal more attractive to buyers.
What If I Can’t Afford Closing Costs?
In some instances, buyers can negotiate for the seller to pay a portion of their closing costs, especially in a buyer’s market. Additionally, certain loan programs might allow closing costs to be rolled into the mortgage or covered by lender credits, thus reducing the upfront financial burden on the buyer. Another option is to lessen your down payment to help cover the closing costs.
Contact American Home Loans in Sandy, Utah to Learn More
You don’t have to navigate the complexities of mortgages alone! If you have any questions or need expert guidance, our knowledgeable team at American Home Loans in Sandy, Utah, is here to help. With years of experience assisting Utah homeowners in purchasing the home of their dreams, we’re committed to providing personalized advice and support tailored to your unique situation—we even offer home loans for bad credit. Don’t hesitate to reach out to our team of home lenders in Sandy, Utah today!