Does Closing Disclosure Mean Loan Is Approved


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does closing disclosure mean loan is approved

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  • A closing disclosure is a collection of documents that include your mortgage’s finalized details.
  • The closing disclosure must be provided by mortgage lenders at least three business days prior to the closing.
  • Errors on the closing disclosure can be fixed prior to closing, but unless there is a change in circumstances, the loan amount and interest rate cannot be altered.

The final document you will receive before closing your home loan is the closing disclosure. Before closing day, carefully go over this comprehensive five-page document to make sure all the information is accurate.

What is a closing disclosure?

A five-page legal document outlining your final mortgage loan terms and closing costs is called a closing disclosure. It includes information on the term of your loan, your monthly payments, fees, and closing costs.

At least three business days prior to closing, your mortgage lender is required to give you the closing disclosure, which contains the final details of your loan. This provides you with enough time to evaluate the final terms and expenses against the details provided in your loan estimate, the three-page document you were given when you got the mortgage offer.

To find out if anything has changed, compare the loan estimate and the closing disclosure. Before the closing, you have time to ask the lender to clarify anything that seems off, unexpected, or unclear.

Why are closing disclosures important?

The borrower’s last chance to go over the terms of their mortgage, ask questions, and comprehend what they are committing to is when they receive the closing disclosure. Crucially, it also tells the borrower how much money they will actually need to pay at closing and how much the mortgage will cost them overall over time.

Furthermore, with a few exceptions—more on that below—the closing disclosure ensures that the lender will pay the fees they quoted and that the closing will proceed as quickly as possible.

What is the three-day rule for closing disclosures?

The “Know Before You Owe” mortgage rule, also known as TRID (the TILA-RESPA Integrated Disclosure rule), or the closing disclosure three-day rule, came into force in 2015. You must receive your closing disclosure at least three business days prior to closing as per this regulation.

You will have time to review your closing disclosure and raise any questions before the closing by having three business days to do so. Use this opportunity to review all of the terms of your mortgage loan and ask any questions you may have of your loan officer, lawyer, or housing counselor.

What is included in the closing disclosure?

Loan terms Check the figures and take note whether these amounts can increase after closing: the loan amount; interest rate; monthly payment, including principal and interest; prepayment penalty, if any; and balloon payment, if any.
Projected payments These add up to your monthly mortgage payment and include the principal, interest and private mortgage insurance (if applicable), as well as estimated escrow and estimated taxes, insurance and assessments, both of which can increase over time.
Costs of closing This section shows your upfront costs, sometimes called “settlement costs.” It includes loan costs, any lender credits and the amount you’ll be required to pay at closing.
Loan costs This section includes charges such as an application fee, an origination or underwriting fee and any points. It also notes any items to be paid by the seller. The loan costs are categorized as “services that the borrower did not shop for” — including the credit report and appraisal — and those that the borrower did shop for, such as the settlement agent fee and title search.
Other costs These include recording fees, transfer tax (if applicable) and insurance premiums due at signing.
Calculating cash to close This table breaks down your costs at closing, including any deposits you’ve already paid, credits and anything that has changed since your lender gave you your loan estimate.
Summaries of transactions This provides a detailed look at your costs, including the home price, your closing costs and the seller’s costs.
Loan disclosures Here you’ll see legal language describing important characteristics of your loan, such as assumption, demand feature, negative amortization and escrow.
Loan calculations This disclosure shows the total amount you are agreeing to pay over the life of the loan, including interest charges.
Other disclosures This includes more details such as the appraisal, missed payments and other aspects of your loan.
Contact information This includes details on how to reach all the parties involved in your loan.
Confirm receipt Signing this page at closing indicates that you’ve received it.

This sample closing disclosure from the Consumer Financial Protection Bureau (CFPB) is a helpful illustration of what your closing disclosure will look like. There is an interactive checklist on the right side of the document. If you’re not sure what to check, use the prompts for each section of the document to guide you.

How to check your closing disclosure

Examine every line of the closing disclosure and contrast the two documents, keeping your most recent loan estimate close at hand. This includes:

  • Review the spelling of your name.
  • Verify the property address.
  • Make sure the loan estimate’s description and amount correspond with the loan’s description and amount.
  • Verify the loan type, interest rate, amount due each month, and other details twice.
  • Verify that you are aware of all the costs and see if any have been added.
  • Check to see if an escrow account will be used by your lender, and be sure you know how it operates.

What can and can’t change on the closing disclosure

Changes are permitted for certain costs on the closing disclosure but not for others. Lenders are not allowed to purposefully understate your expenses and then increase the amount at closing.

Generally speaking, get in touch with your lender and request an explanation if any of the following appeared different from your loan estimate or if it was altered.

  • Loan details: Usually, this section will correspond to your loan estimate. If it doesn’t, ask your lender why.
  • Loan amount: Take note that if your closing costs were rolled in, for instance, the loan amount may vary.
  • Interest rate: Get clarification from your lender if your rate changes after you locked it in and it differs from the loan estimate.
  • Estimated total monthly payment: If this changes, be sure to ask your lender for a clarification.
  • Closing costs/cash to close: These can also change.
  • Make sure there are no new services that were not included in your loan estimate. Services the borrower did not shop for
  • Services that the borrower did shop for: Inquire with your lender about the selection and inclusion of any new services that are listed here.

It should be noted that certain closing costs, such as those for required services you purchased from an affiliate of your lender or mortgage broker, or fees paid to the lender or mortgage broker, cannot increase. Transfer taxes cannot increase, either. Mortgage Note: These expenses may vary by any amount in the event of a “change in circumstances” that necessitates a new loan estimate. A shift in circumstances can occur if you choose to apply for a different kind of loan, make a larger down payment, your home doesn’t appraise for the amount you expected, your credit report changes, or your income documentation isn’t what you expected.

Prepaid interest, insurance premiums, initial deposits made into an escrow account, and fees for certain third-party services are examples of additional closing costs that are subject to limitless increases.

Three types of closing costs are allowed to rise by a maximum of ten percent. These consist of certain fees from third-party service providers and recording fees. In the event that something changes, these expenses might go up by more than 10%.

Try negotiating with your lender or take into consideration a no-closing-cost mortgage if you’re worried about how you’ll pay for closing costs.

  • According to the law, mortgage lenders must deliver the closing disclosure three business days after the closing. By that deadline, if you haven’t received this document, get in touch with your lender right away. Wait until you receive and review the disclosure before proceeding with the closing.
  • Notify your loan officer and the title company to have any errors on the closing disclosure corrected before the closing. It’s crucial to get in touch with them right away because the document might need to be redone, which could cause the closing date to be delayed.
  • Even though you can evaluate loan estimates from several lenders, the lender you choose to work with will only give you one closing disclosure.
  • Prior to you receiving the closing disclosure, your loan is approved, or considered “clear to close.” However, be advised that your lender may still reject your loan if you undergo a significant financial change at this time, such as losing your job or obtaining a new credit line.
  • The terms of the mortgage are set in stone once you sign the closing disclosure. Unless you refinance or look for options for relief through your servicer, you are unable to make any additional changes to your loan or payments.
  • No. By signing the closing disclosure, you attest to having read the contents of the document. You have the option to back out of the house sale, but you will probably forfeit your earnest money deposit and any money you have already paid for closing costs, such as the cost of the home inspection.

does closing disclosure mean loan is approved


Is closing disclosure same as final approval?

No, approval of your loan does not always imply receipt of a closing disclosure. You might come across inaccurate data or something you would like to modify.

Can a loan be denied after closing disclosure is signed?

It is possible to reject a mortgage after the closing disclosure is provided. Before you sign closing documents, many lenders utilize outside “loan audit” firms to confirm your income, debt, and assets once more. Your loan may be rejected if they find significant changes to your income, credit, or availability of cash for closing.

Does closing disclosure mean underwriting is complete?

Getting your Closing Disclosure basically means that the mortgage process is almost over, but it’s not quite. Prior to the mortgage closing, your loan officer may run another credit check on you. Any significant alterations to your reports could cause your closing date to be postponed or worse.

What comes after closing disclosure?

No, the mortgage process does not end with the closing disclosure. You will still need to sign the closing disclosure and finish the closing process, which usually entails paying closing costs and signing all required documentation.

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