Buying real estate – a home, land, or commercial property – is quite possibly the biggest purchase anyone will ever make. Whether purchasing a commercial or residential property, the first step is finding the right property and next is securing financing. Once you make an offer and negotiate a selling price, the buyer can schedule a property inspection to ensure there are no issues that will prevent them from moving forward. Then, if all looks good to the buyer and seller, the escrow and title company will work with all parties to manage the closing process. During the final stages of that process, the lender must provide a closing disclosure form.
The primary focus of the closing disclosure form is to present the final details about the mortgage loan that’s been selected. The closing disclosure form includes the terms of the loan, and the projected monthly payments while breaking down how much is paid in fees and other costs to secure the mortgage, i.e. the closing costs.
What to know about the closing disclosure form
First things first, a closing disclosure form does not exactly mean that the lender has approved the mortgage/loan. During this period, the borrower is required to look at all the details as there may be incorrect information or something they want changed. It is a five-page document, so it requires attention. As it is a legal document, it is not uncommon to have an attorney review it and help the borrower understand its terms and conditions, while resolving any problems and leaving no questions unanswered.
It also gives the creditor some grace in the underwriting process to ensure there are no underlying issues with the property or the financial status of the borrower. By law, the creditor is required to provide the closing disclosure at least three business days before closing. The three-day rule is often referred to as the Know Before You Owe rule. The closing disclosure is part of the TRID and is a companion to the loan estimate. TRID is a combination of the Truth in Lending Act (TILA) and the Real Estate Settlement Act. The objective of TRID is to help the homebuyer shop for the best mortgage/loan by providing standardized and transparent loan information details, while also protecting against misleading or confusing lending practices.
What happens after the closing disclosure period?
Errors on the closing disclosure form may be corrected before the closing but the loan amount and interest rate cannot change unless there is a change in circumstances. This all happens in the final review. Here is a list of some of the other steps the lender may conduct at this stage in the process too:
- Double-check all documents are correct.
- Pull a credit report and verify employment one final time.
- Loan processing.
During loan processing these major milestones need to happen before the loan is officially funded:
- Submission of loan for processing
- Submission to underwriting
- Conditional approval
- Cleared to close
- Closing
- Funded
Closing day is a momentous day, which involves lots of paperwork before receiving the set of keys to a new home or commercial property. Title companies play a pivotal role in ensuring an efficient closing process that is transparent and in accordance with the title insurance underwriting requirements and the purchase and sale contract.
There are a few instances where a closing disclosure form is not issued or required. These include when a homeowner secures a reverse mortgage or a home equity loan or when the buyer is paying by cash. However, for most transactions, a closing disclosure form is issued by the creditor.
Landmark Title’s experience in title and escrow spans more than 45 years and our team of professionals in Arizona and Nevada knows just what to do to successfully navigate residential and commercial transactions. They are well-versed in complex closings and the nuances that often arise and have the knowledge needed to ensure a smooth closing that is secure and on time. If you would like to learn more about how we work or have any questions, please get in contact here.