The lender must provide a Closing Disclosure to the borrower that outlines the final, actual terms of the mortgage including interest rate, closing costs and mortgage features at least three business days prior to the close of your mortgage. Prior to your mortgage closing, you should compare the Closing Disclosure with the Loan Estimate provided by the lender at the beginning of the mortgage process to ensure that your final, actual interest rate and closing costs did not increase significantly as compared to the Loan Estimate. For the example Closing Disclosure document below, we show a $380,000 fixed rate mortgage with an interest rate of 4.250% and the borrower pays total lender fees of $1,070.
There are typically minor differences between the figures provided in the Loan Estimate and the final figures provided in the Closing Disclosure. However, if there are meaningful discrepancies between the Loan Estimate and the Closing Disclosure and the final terms have increased significantly, then ask the lender for an explanation. You should cancel (also known as rescind) the mortgage if you are not satisfied with the lenders explanation and the discrepancies cannot be resolved. For a home purchase mortgage, you can cancel your loan at any time before you sign loan documents and you are free to work with a different lender. For a refinance you can cancel your loan up to three business days after signing loan documents during the right of rescission period.
In the example document, we show a scenario where the final loan terms as outlined in the Closing Disclosure essentially match the estimated terms outlined in the Loan Estimate. Always be sure to review the Closing Disclosure carefully before finalizing your mortgage. Please note that this is an example Closing Disclosure document that should be used for informational purposes only.
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