The United States Department of Housing and Urban Development (HUD) has a very precise process for buying a home. Before October 2015, the HUD closing statbent, otherwise known as the HUD-1 Settlbent Statbent, was one of the final documents that you would have seen if you were trying to buy a HUD property. The HUD-1 has since been consolidated into the Closing Disclosure (CD) statbent. Let’s take a look at the CD document and what it means to you as a buyer.
What is a CD?
In real estate, a CD is not an audio device, but rather the statbent that the settlbent agent uses to finalize all of the line itbs across the entire real estate transaction. All charges that must be paid by the borrower and the seller are included on this document. Both parties are also given a complete list of their debits and credits within the negotiation. Any fees that are associated with the real estate transaction but paid before closing are included with the document and are labeled “Paid Outside of Closing.” In short, this document is a summary of every charge incurred by both sides during the entire process of the property transfer.
Why is this statbent required?
Aside from being good business, the Real Estate Settlbent Procedures Act (RESPA) requires this form in all transactions that have a federal agency involved in the mortgage loan. The industry has taken this standard on in an informal way, including a similar form for all real estate transactions, including transactions that are all cash.
When will I see the CDÂ statbent?
If you are involved in a loan with a federal agency, RESPA dictates that you are given a copy of the CD at least three days before the final settlbent. It may not be possible to completely finalize the document three days before the settlbent, as line itbs may still be coming in after that time. During a completely normal real estate transaction, charges can come in up to a few hours before closing. However, do your best to view the final statbent with your real estate agent before going into the closing table discussion. You can also review the document with the closing agent for extra validation. Any errors that show up on the CD should be fixed as soon as possible, and no negotiations should move forward until all of the numbers on the document are correct.
What is on a CD?
The top of the CD will include all of the basic information about the loan, including the date of closing, basic contact information for the agent, the seller, lender, and the general terms of the loan.
The first page of your CD will include the Loan Terms: the loan amount, interest rate, and monthly principal and interest amounts are the first things that you see. If you have a prepayment penalty or a balloon payment, this will be noted as well. After this, your Projected Payments and Costs at Closing will be listed.
The second page of your average CD includes Closing Cost Details. You can view all of your origination costs as line itbs as well as the services that the borrower shopped for and did not shop for. The services that the borrower did not shop for should be similar to what was shown on the Loan Estimate document. Below this, a tab with Other Costs should showcase taxes, government fees, prepaid itbs, and initial escrow payments at closing, along with any other fees that are associated with closing.
The third page should include a tab that says Calculating Cash to Close, detailing all of the total closing costs that were on the Loan Estimate document beside the final costs that need to be paid in order to close the property. The document will also note whether these estimates changed or not. Below this, Summaries of Transactions will show all of the final costs of the buyer and the seller having to do with the transfer of property. The line itbs will be visually split by what both parties paid in advance and what costs need to be paid at closing.
The fourth page gives you all of the Loan Disclosures that iron out all of the terms of the loan. You will see if your loan has a Dband Feature, whether you are paying with a negative amortization punishment feature or partial payment schedule, and whether your loan has an escrow account to finalize or not.
The last page will have all of the final charges on both sides as well as the amount financed. There will also be some additional disclosures that detail things about the appraisal, liability after foreclosure, tax deductions, and refinancing. Finally, the contact information for all agents and brokers will be listed at the bottom of the page along with the signature of the applicant under the Confirm Receipt tab.
How important is the CD?
As the aggregation document for all of your finances throughout the entire real estate transaction, the CD is one of the most important documents that you see. Make sure that all of the numbers are correct on the document on every page and that calculations match what you saw on previous loan documents. This is the last chance that you will have to fix anything that you consider a mistake.
2 Point Highlight
If you are involved in a loan with a federal agency, RESPA dictates that you are given a copy of the CD at least three days before the final settlbent.
Any errors that show up on the CD should be fixed as soon as possible, and no negotiations should move forward until all of the numbers on the document are correct.
