The Closing Disclosure Explained
On October 3, 2015, federal regulations mandated the implementation of a new form – the Closing Disclosure (CD) – for most residential loan transactions. This new form replaces the HUD-1 Settlement Statement and Truth-in-Lending document that was previously
required for residential transactions.
This is a brief overview of the Closing Disclosure.
Page 1 of the Closing Disclosure includes the following
- Loan terms
- Loan amount
- Interest rate
- Monthly P&I, and
- Any prepayment penalty or balloon payment.
This page also discloses the amount of the monthly
escrow deposit for taxes and insurance, states the
total closing cost amount for the borrower and
how much money the borrower will need to bring
Page 2 of the Closing Disclosure is similar to the
HUD-1 Settlement Statement. It provides a
breakdown of all the closing costs and fees associated
with the transaction, as well as the party responsible for
paying each of the costs and fees.
Page 3 of the Closing Disclosure demonstrates the calculation for the amount the borrower must bring to closing. This page also provides a comparison to the charges disclosed on the Loan Estimate, so that borrowers can see the difference between the amounts on the Loan Estimate and final Closing Disclosure. The rest of the page shows summaries of the borrower and seller costs and credits.
Page 4 lists the other terms of the loan, including:
- Whether the loan is assumable
- If the loan has a demand feature
- If there is a late payment fee
- If the loan is negatively amortized
- Whether the lender will accept partial payments
- Informs the borrower the lender will have a security interest in their property.
Page 5, contains the following under “Loan Calculations”:
- Total of payments over the life of the loan
- Finance charge
- Amount financed
- Annual Percentage Rate (APR)
- Total interest percentage information
Under “Other Disclosures” the consumer will find information about :
- Appraisal (if applicable)
- Contract details
- Liability after foreclosure
- Refinance information
- Tax deductions
The bottom of Page 5 contains Contact Information for the parties involved and signature lines.