What is a Closing Disclosure?

A Closing Disclosure is an essential document provided to borrowers in real estate transactions. It serves as a settlement statement that integrates and replaces the previous HUD-1 form. This detailed document outlines all the final terms of the loan, including the costs associated with the mortgage, details of the loan, closing costs, and any other fees that may be charged during the closing process. Importantly, it provides both buyers and sellers with a transparent breakdown of all financial aspects involved, helping to ensure that all parties understand their obligations before the transaction is finalized.

The Closing Disclosure must be provided to borrowers at least three days before the closing date, allowing them time to review the terms and confirm that everything is accurate. This is crucial for avoiding any surprises at the closing table and ensuring a smooth transaction.

The other options, while they may include elements of the closing process, do not encompass the specific purpose and functionality of the Closing Disclosure as thoroughly as the correct choice does.