A couple of weeks ago, I gave you a checklist of all the things that need to be taken care of in the final days of your Lake Havasu home purchase. Among the items on this checklist was going over your closing disclosure form. But what exactly is a closing disclosure form and what should you expect to find on it? Let me explain.
Closing Disclosure Form
Sometimes referred to as the "CD", the closing disclosure form clearly states various pertinent aspects of your home purchase. Before 2015, buyers received a HUD-1 settlement statement. The HUD-1 ran on for several pages and tended to include redundancies. Often times, buyers became confused by what it said. With no timeline requirement, buyers usually didn't even get to see it until the day of closing. So, that didn't leave much time to thoroughly read the HUD-1 and have their questions answered. In August 2015, that changed.
Enter the closing disclosure form. Dozens of pages were whittled down to only a few. On this form, it shows the loan amount, interest rate, and monthly payment. It also discloses your closing costs, including how much cash you must bring to the closing table. Taxes, HOA fees, insurance fees, and title fees should also be outlined here. By law, all buyers must receive their closing disclosure form no later than three days before closing. That gives you time to read it before you sign your final paperwork.
Closing Disclosure Form vs Your Loan Estimate
At some point along your path to Havasu homeownership, you received a loan estimate (LE). This showed you your projected interest rate and related fees. You may have even received several over the course of your escrow due to changes made along the way. Take out your latest LE and compare it to the information on your closing disclosure form. Since the LE is only an estimate, don't be surprised to see slight discrepancies between that information and your CD.
What to Watch for on Your Closing Disclosure Form
Take your time to carefully review your CD. Make sure your name is spelled correctly. This will be the name found on your official title for your property. Even minor errors in the spelling of your name create much bigger issues down the road. Nip that in the bud right away. Then, double check the terms of your loan (15 or 30 years, usually). Also, make sure the cash to close, closing costs, and loan amount are accurate. Finally, make sure your estimated monthly payment and all other estimated costs appear to be correct. If anything looks out of line, bring it up to your lender right away.
Since buying a home is usually the single biggest investment you will make in your life, you want to be as informed as possible. Again, I suggest that you take a moment to read your CD as soon as you receive it. Make notes about what you don't understand. Then, ask your lender or your Lake Havasu real estate agent to clarify any questions you might have. Consumer Finance provides a wonderful line-by-line breakdown of what you can expect to see on a closing disclosure form. Never sign any document unless you know exactly what you're signing, especially when it involves something of this magnitude.