The LOAN ESTIMATE disclosure is provided to the borrower three business days of their loan application. In the typical case, the first Loan Estimate is sent before the borrower’s property is appraised, and before the loan terms (interest rate and points) are locked. This usually results in a second disclosure following receipt of the appraisal, a third disclosure when the loan terms are locked, and sometimes a fourth disclosure if the loan terms change for some other reason. The Closing Disclosure should reflect the terms in the final Loan Estimate.  

In preparation for the closing, the buyer will be receive a copy of the final Closing Disclosure from their lender. The Closing Disclosure (CD) is the similar to the Loan Estimate form the buyer signed with the application. The CD will include the exact numbers (vs. the estimates available at the start) and will itemize any items already paid for throughout the transaction up to close (appraisal deposit / deposits with offer and purchase and sale).

The final Closing Disclosure be provided to borrowers a minimum of three business days prior to closing.  Borrowers should check the Closing Disclosure carefully as soon as they are received in order to avoid the pressure and inevitable errors that occur if they are read for the first time at the closing table. The focus of your examination should be the loan pricing information and other critical features of your loan. You want to assure yourself that the deal you are getting is the one you negotiated to receive. 

Here are a few of the items on the Closing Disclosure that deserve special attention.  If any of these items are not what you agreed to at the time your loan was locked, contact your lender immediately. 

Mortgage pricing: This is the rate and points that were agreed upon when you locked the loan.  They are disclosed in two separate places on the Closing Disclosure: the “Interest Rate” item in the “Loan Terms” section, and the “Points” item (usually the first line item) in the “Loan Costs” section.

Origination Fee: Also in the “Loan Costs” section.

Prepayment Penalty:  This item is in the “Loan Terms” section; if it is marked “YES” you will be subject to a penalty if you refinance, sell your home, or make accelerated payments during the specified time period.

Mortgage Insurance:  This is disclosed in the “Projected Payments” section and in the “Other Costs – Pre-paids” sections. 

Demand Feature:  This is disclosed in the “Loan Disclosures” section.  If “Demand Feature” is checked, the loan probably has a balloon payment, meaning that the remaining loan balance must be paid in full at some date. If you are not getting a balloon loan, you must find the entry in the note to see the conditions (if any) under which the lender can call the loan. If the right to call the loan is unconditional, demand that it be removed.

Cash to Close from Borrower: At the bottom of the “Summaries of Transactions” section is a line item labelled “Cash to Close from Borrower”.  If you agree with the amount you must provide a certified check for that amount at closing.