Here’s a detailed guide on how to review a Closing Disclosure (CD) with clients — especially for California real estate agents and loan officers who want to ensure buyers fully understand what they’re signing.

🧾 1. What the Closing Disclosure Is

The Closing Disclosure (CD) is a five-page document the lender must provide at least three business days before closing.
It summarizes final loan terms, closing costs, and cash needed to close.
As an agent, your role is to help clients understand, not to give legal or tax advice.

📘 2. Step-by-Step: How to Review Each Page

Page 1 – Loan Terms & Summary

✅ What to Check

  • Loan amount: Confirm it matches the purchase agreement or final negotiated amount.
  • Interest rate & payment: Verify the rate and monthly payment (including principal + interest).
  • Prepayment penalty or balloon payment: Ensure the client understands if either applies.
  • Projected payments: Show how payments may change over time (especially with ARM or escrow).
  • Estimated taxes, insurance, HOA: Clarify these are estimates and may change.

💡 Explain: “This page shows what your monthly mortgage will look like, including what’s fixed and what might change.”

Page 2 – Closing Cost Details

✅ What to Check

  • Loan Costs (A, B, C):
    • Origination charges, points, application, underwriting fees — ensure they match earlier loan estimates.
  • Other Costs (E–H):
    • Taxes, recording, prepaids, insurance, HOA dues — verify they are reasonable and expected.

💡 Tip: Highlight differences from the Loan Estimate. Lenders must explain increases beyond legal tolerances.

Page 3 – Cash to Close

✅ What to Check

  • Total closing costs: Confirm they’re consistent with prior estimates.
  • Down payment & deposits credited: Ensure the Earnest Money Deposit (EMD) and any seller credits are properly applied.
  • Cash to close: The final amount the buyer needs to bring to closing — review wiring instructions carefully.

💡 Explain: “This page tells you how much money you’ll actually need to bring to the closing table.”

Page 4 – Loan Disclosures

✅ What to Check

  • Assumption: Can the loan be assumed by another buyer?
  • Late payment policy: When and how much the late fee is.
  • Servicing: Who will collect your payments after closing.
  • Escrow account info: Clarify whether taxes and insurance are included in monthly payments.

💡 Tip: Reassure clients that these terms outline their long-term obligations, not just the closing process.

Page 5 – Loan Calculations & Contact Info

✅ What to Check

  • Total of payments: The total amount paid over the life of the loan.
  • Finance charge & APR: Explain that APR is higher than the interest rate because it includes fees.
  • Contact info: Verify accuracy for the lender, escrow, and real estate professionals.

💡 Explain: “This page helps you see the big picture — how much you’ll pay over the full loan and who to contact after closing.”

⚠️ 3. Common Red Flags to Watch For

  • Loan amount or interest rate differs from the purchase agreement.
  • Closing costs increased significantly without explanation.
  • Seller credits or EMD missing from the summary.
  • Incorrect property taxes, insurance, or prepaid items.
  • Mismatched names, spelling, or address errors.

📘 Always flag discrepancies for the lender or escrow officer immediately.

✅ 4. Best Practices for Agents

  1. Compare CD to Loan Estimate and Purchase Agreement.
  2. Review in person or on Zoom — highlight each section visually.
  3. Encourage buyers to ask the lender questions about numbers, rates, and fees.
  4. Remind clients not to wire funds until escrow gives verified instructions (to avoid wire fraud).
  5. Document your review in your file — a short email summary like “Reviewed Closing Disclosure with client on [date].”

💬 5. Sample Script to Explain to Clients

“This document is your Closing Disclosure — it shows all the final numbers for your home purchase.
My job is to help you understand what’s here, but your lender is the best person to confirm loan terms and fees.
Let’s go page by page to make sure everything matches what we’ve agreed to.”

 

Disclaimer:
The questions and answers provided are for general guidance only and may not cover all details or apply to every situation. If anything is unclear or you need further clarification, please visit car.org for official resources and the most up-to-date information from the California Association of REALTORS®.