Closing Disclosures | Ckezepis Law, PLLC

Closing Disclosures

As children, we obsess over fantasies and make believe. Whether Barbies or G.I. Joes are the chosen vice, we always give our toys a name, personality, and most importantly, a home. This home, perhaps an ornate dreamhouse or cozy bungalow in our imagined forest, gave us a sense of security. We never questioned our reliance on that home; we simply knew we needed it. It was a replication of our own lives because as young as we were, we could see the magic in every home.

Working as an intern for a real estate law firm, I see the more practical side of houses. While they may not have the same magic they did as a kid, their blatant value to the owners is comparable. Every house is four walls filled with memories, laughter, dreams, and realizations—and isn’t that magical?

Information About the Closing Disclosure

Even though dress-up switched from princess costumes to a business casual look from 9-5, I find myself excited every time we help someone buy or close on a house. Although these transactions are a heap of confusing forms and archaic language, my first-time shadowing, a closing disclosure form piqued my interest.

During the settlement process, people will receive a Closing Disclosure (CD) form. There are two different types of CD forms, one for a seller and one for a buyer. These forms are pages of overwhelming real estate law jargon and confusing numbers. I would be lying if I didn’t admit it took me a full week to understand it.

As a newcomer looking over the Seller CD form document, I saw it contained important information relating to the financials of the transaction. The first page typically lays out all of the neccesary contact information from the agents and brokers, as well as the summary of transactions.

The summary of transactions shows the fees due from and for the seller at closing. This number is a combination of every adjustment, fee, closing cost, loan, and deposit present in the sale. It also includes other items like the city, town, and county taxes.

The second page is a continuation of the first, but focuses more on the other costs associated with the sale. These include any escrow costs, recording fees, and other services provided by different businesses. This might include a document prep fee from a law firm, fiduciary duties, real estate commissions, and a home inspection invoice.

The most important sections of the form, in my opinion, are the numbers shown as the total due to seller and from seller at the end of the first page. If these numbers don’t match up with your estimates, go through each and every subsection to see where there may be a mistake. The nice thing about these forms is that they are extremely detailed and show what each amount of money is going to.

The Buyer CD is very similar to the Seller CD. However, the Buyer CD is stretched across five different pages, so it naturally contains more financial information neccesary to the buyer. The Buyer CD emphasizes the loan more and devotes four of the five pages to loan details. The reamining page, page three, displays a table with the summaries of transactions, including the final calculations of money from the buyer.

Information About the Closing Disclosure

Your lender, or the bank or entity who gave you the money for the loan, is required to give you the Closing Disclosure AT LEAST three days before you close on the loan. You have the power to select your Lender, but there are specific requirements you must fulfill to qualify for specific loans.

Use the three-day window to compare your costs and ask your lender any final questions. It’s never a bad idea to be thorough. Some possible questions to ask:

  • “Can I get a loan rate lock?”
  • “Is there a prepayment penalty?”
  • “Are there any other costs or fees?”

Click here for an additional list of 13 important questions you might want to ask your lender!

When you eventually receive the form, screen for any errors. All misspellings and inaccuracies should be corrected immediately. While it may seem like a hassle, legal instruments have the power to protect your rights to your home. Consult with your attorney’s office and lender about corrections that need to be made.

Even though I better understand the realities of real estate, the euphoria that floods the room after a sale or purchase still brings a child-like smile to my face.

Definitions

Aggregate Adjustment: A calculation your lender uses to prevent collecting more money for your escrow account than is allowed under the Real Estate Settlement Procedures Act (RESPA). Under RESPA, lenders can’t keep more than 1/6 of your annual property tax and insurance payment amount as a cushion in your escrow account at any one time

Annual Percentage Rate: The interest rate you pay on a loan on a yearly basis. In simple terms, it’s the cost of borrowing the money.

Contract: A legally binding agreement between two parties concerning the terms of purchase or transfer of real property.

Escrow: Funds held by the lender to make payments for your homeowners insurance and property taxes. Lenders will collect them monthly along with your loan payment and then pay the tax and insurance bills when they are due.

HOA Fees: An amount of money that must be paid by owners of certain types of residential properties. HOAs collect these fees to assist with maintaining and improving properties in the association. HOA fees are prorated based on a vote by the HOA board and can be monthly, semi-annually, annual, etc.

Negative Amortization: An increase in the principal balance of a loan caused by a failure to cover the interest due on that loan.

Good luck and happy house hunting!

Related statutes:

Statute 45A-4 reads, “The settlement agent shall cause recordation of the deed, if any, the deed of trust or mortgage, or other loan documents required to be recorded at settlement.”