What is the purpose of a closing disclosure in a real estate transaction?

The purpose of a closing disclosure in a real estate transaction is to detail all closing costs and final loan terms. This document is crucial as it provides a comprehensive overview of the financial aspects of the transaction, ensuring that the buyer is fully informed about the costs they will incur and the terms of the loan they are agreeing to.

A closing disclosure includes various elements, such as loan amounts, interest rates, monthly payment amounts, and itemized lists of all closing costs associated with the transaction, including fees for services like appraisal, title insurance, and recording fees. This thorough breakdown enables buyers to compare their estimated costs with the actual figures, allowing them to be aware of their complete financial obligations before the transaction is finalized.

By fulfilling this educational role, the closing disclosure helps prevent surprises at the closing table, ensuring a smoother transaction process. It is a significant legal document that helps protect both parties involved by providing transparency and clarity regarding the financial components of the sale.