Last October, a new five-page form called the Closing Disclosure was established to provide borrowers with a better understanding of the all of the details about their mortgage loan. This new Closing Disclosure form highlights the important terms of the loan, the projected monthly payments, and how much the borrower will pay in fees and closing costs to secure your mortgage. The mantra of the Consumer Financial Protection Bureau, the organization that oversees Federal financial legislation that protects consumers is “Know Before You Owe”. Their main objective in creating the new disclosure form was to ensure that borrowers would have a full understanding of their loan terms before they sign their paperwork.
Not only does the Closing Disclosure make it easy to review the vital aspects of a loan, the timing of the statement is another very important change as it must be sent to borrowers at least three days prior to their closing date.
Previously, borrowers would have to review all of the mortgage paperwork at closing, which can already be an overwhelming time. The new Disclosure statement will replace the existing HUD-1 Settlement Statement. Here are some other important points to know about the Closing Disclosure form.
The new CFPB changes help you Know Before You Owe!
The changes in the disclosure form offer better clarity about the loan details which helps consumers avoid costly mistakes. Now, it is much easier to identify and review:
- How much is being borrowed
- What the interest rate is and
- What type of loan program is being offered
In addition, borrowers will know exactly what their month payments will be including the principal and interest, any mortgage insurance or estimated escrow. The intent is that borrowers will go into a closing with a much better comprehension of their loan terms.
Gives borrowers time to review the loan details before the settlement.
The closing settlement on a property can be a very overwhelming experience. Many people are hesitant to speak up and ask for clarifications about any details that aren’t clear. Receiving the Disclosure papers three days prior to a closing will now give home buyers extra time to review and ask questions that they need to before signing off on a mortgage.
Clearly states how much money is needed at closing.
This can be one of the most frustrating aspects of a closing-not knowing exactly how much you need to bring to the settlement. There is a “Calculating Cash to Close” tab on page three of the Disclosure form that details that correct amount needed. It will also explain any amounts that have changed since receiving the Loan Estimate.
Should you have any questions about the new Closing Disclosure statement or any other aspect of mortgage lending, I would be happy to answer them by email at: firstname.lastname@example.org. I have over 12 years of experience in loan origination and am passionate about helping Tampa Bay-area residents realize their dreams of home ownership.