A mortgage Closing Disclosure (CD) is a simply a 5-page form that you are provided outlining the costs and terms of your mortgage during the mortgage closing process. It happens to be one of the most important pieces of paperwork you need to scrutinize prior to closing on a home. It will outline the final terms of your loan and include the final mortgage rate, loan features, and closing costs involved in the mortgage loan closing process. It is supposed to cement the details outlined in the Loan Estimate, which contains the approximate fees you would have paid if you wanted to close on the home.

The Closing Disclosure should help you, the borrower, verify whether you are receiving the mortgage with the terms you agreed to at the beginning of the mortgage closing process. The CD contains important details that you should be aware of prior to closing on a home. These details are spread over 5 pages and include:

Page 1
The Closing Disclosure starts with a summary of information about you and the mortgage in the mortgage loan closing process. Key loan terms such as the mortgage amount, interest rate, and potential prepayment penalties are highlighted here. Projected payments of mortgage insurance, closing costs (the amount of money it takes to close the loan), and cash to close (the final amount you need to pay on the day of closing) will also be outlined on this page.

Page 2
This page contains a detailed breakdown of the closing costs associated with the mortgage closing process listed in 2 subcategories. The first subcategory details all the costs associated with the loan while the second outlines all the other costs to close involved like recording and transfer fees. This page will also contain all the costs that are typically paid for by the seller ranging from real estate commissions to property transfer taxes.

Page 3
This section consists of 2 tables, Cash to Close and Summaries of Transactions table. The Cash to Close table consists of the breakdown of the total amount that the you must pay to close the transaction. The Summaries of Transactions table highlights the entire transaction from the perspective of both the seller and the buyer and contains all the adjustments for the expenses and credits that you have already paid. The costs that remain outstanding in the mortgage closing process will also be highlighted in this section.

Page 4
This page contains information on the late payment penalties that apply and will describe escrow accounts and the homeowner’s insurance and property tax payments that are involved. It will also mention whether negative amortization applies in your loan closing process, where your mortgage balance will increase over the term of your mortgage. Assumption will also be described in this section to determine whether you can transfer your mortgage to a third-party without the lender’s permission. Finally, it will describe the property that is used as security for the mortgage.

Page 5
This page will contain a summary of the contact information of all key parties as well as a loan disclosures summary. This summary includes information about the mortgage contract, refinancing the mortgage, foreclosure liabilities, and the appraisal report. Besides that, it will also highlight all scheduled payments that will apply over the course of your mortgage and the amount financed. The Total Interest Percentage (TIP) or the total interest you will pay over the entire mortgage term as a percentage of your loan amount will also be outlined here.

After the Closing Disclosure is signed and delivered to the lender, the loan documents are finalized, and the mortgage can be funded. At the closing settlement meeting, the closing agent who is responsible for administering the mortgage closing process and transferring the funds will provide the CD to you along with other legal documents to seal the deal. Upon signing of all the necessary documents, the funds are released, and the mortgage closing process is complete.

The mortgage loan closing process relies on the Closing Disclosure to summarize the final loan terms, cash flows at closing, and any financial information that pertains to the transaction. It is usually provided to compare the final terms and costs with the estimated ones provided initially with the Loan Estimate. Once the CD has been approved and signed at the closing settlement meeting, the final stage of the loan closing process is initiated and the home can be yours without further complications.