The closing disclosure is one of the most important documents a buyer gets during the mortgage lending process, because it spells out all the details of their mortgage loan, including the interest rate, the total borrowing costs, the amount of the monthly payment, and how much money will be required at closing.

It also allows the borrower to catch any errors and correct any wrong information before signing the final loan paperwork.

By federal law, the lender must give a five-page closing disclosure form to the borrower three days before closing. This allows them to review it and make certain that nothing has changed substantially, from the loan estimate they received when they applied for the mortgage.

The three-day rule means that the lender is required to provide a new disclosure if:

• The annual percentage rate (APR) has changed by more than one-eighth of a percentage point for a fixed-rate loan or one-quarter of a percentage point for an adjustable-rate loan
• The lender has added a mortgage prepayment penalty
• The loan product has changed – for example, the borrower has made a last-minute switch from an FHA loan to a conventional loan

Certain portions of the closing disclosure may not be changed once the three-day review period has passed. If there are changes required, a new three-day period will begin once the new closing disclosure is delivered. No changes can be made once the document has been signed.

Three business days after receiving the closing disclosure, assuming there are no changes to be made, the borrower generally must use a cashier’s check or wire transfer to bring the required amount to the closing table. They will sign the papers to close the loan and transfer ownership from seller to buyer.

Once the paperwork is signed and the lender funds the loan, the buyer receives a final settlement statement. If the closing disclosure overestimated any costs, the buyer will receive a refund for the difference. Timing varies from state to state on when that refund is typically received.

Ideally, your clients will have talked to one or more lenders before they select a home and will have decided on the specific type of loan that will best meet their needs. The closing agent must generally get all necessary information to the lender at least 10 to 14 days prior to the closing date so that the delivery requirement may be met.

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This material is not intended to be relied upon as a statement of the law, and is not to be construed as legal, tax or investment advice. You are encouraged to consult your legal, tax or investment professional for specific advice. The material is meant for general illustration and/or informational purposes only. Although the information has been gathered from sources believed to be reliable, no representation is made as to its accuracy. Intended for distribution to only one per individual for marketing purposes only on behalf of our company. Not for reproduction.

About Bobbi Pronin

Bobbi Pronin is an award-winning writer based in Orange County, Calif. A former news editor with more than 30 years of experience in journalism and corporate communications, she has specialized in real estate topics for over a decade.

Bobbi is not an employee of Anywhere Integrated Services or affiliated with its title companies.