When you are buying a home in Philadelphia or anywhere else in Pennsylvania with a mortgage, one of the last important documents you will receive before closing is the Closing Disclosure.
It shows the final details of your mortgage, including your interest rate, monthly payment, closing costs and the amount of money you need to bring to settlement.
For most mortgages, federal law requires the Closing Disclosure to be provided at least three business days before closing. This gives you time to compare the final numbers with your Loan Estimate, catch mistakes and ask questions before signing.
Here is what Pennsylvania homebuyers should know.
What is a closing disclosure?
A Closing Disclosure is a five-page document showing the final terms and costs of your mortgage loan.
You typically receive it near the end of the homebuying process, after your offer has been accepted, your mortgage has moved through underwriting and you are getting ready for settlement.
The Closing Disclosure is a federal mortgage document, so the basic rules are the same whether you are buying a house in Philadelphia, Pittsburgh or another part of Pennsylvania.
Your lender must generally make sure you receive it at least three business days before closing.
That three-day period is important. It gives you a chance to make sure the mortgage you are about to sign is the mortgage you expected.
One important distinction: the Closing Disclosure is not the same thing as the Pennsylvania Seller’s Property Disclosure Statement. The Closing Disclosure deals mainly with your mortgage and closing costs. The seller disclosure deals with the condition of the property.
What is the most common disclosure in real estate?
There is not one disclosure that applies to every real estate transaction. Two documents buyers commonly encounter are the Seller’s Property Disclosure Statement and, when financing a purchase with a covered mortgage, the Closing Disclosure.
In a typical Pennsylvania resale, the seller’s disclosure tells the buyer about known material defects with the property. Pennsylvania law generally requires sellers subject to the Real Estate Seller Disclosure Law to provide a signed and dated disclosure before the buyer and seller sign the agreement of transfer.
The Closing Disclosure comes much later. It focuses on the financial side of the purchase.
So, when looking at a house in PA for sale, you may see both:
Seller’s Property Disclosure: What does the seller know about the home’s condition?
Closing Disclosure: What are the final numbers for your mortgage and closing?
They serve very different purposes.
Is seller disclosure mandatory in PA?
Yes, seller property disclosure is required for many residential sales in Pennsylvania, but there are exceptions.
Pennsylvania’s Real Estate Seller Disclosure Law requires sellers covered by the law to disclose known material defects by completing a property disclosure statement. The buyer generally must receive the signed and dated statement before the agreement of transfer is signed.
The Pennsylvania disclosure covers areas such as:
- Roof and structural problems
- Basements and crawl spaces
- Termites and other pests
- Plumbing and electrical systems
- Heating and air conditioning
- Water and sewage systems
- Additions and remodeling
- Drainage and boundaries
- Hazardous substances
- HOA or condominium information
- Certain legal or title issues
Pennsylvania defines a material defect as a problem that can have a significant negative effect on the property’s value or create an unreasonable risk to people on the property.
There are exceptions to the disclosure requirements. Pennsylvania law excludes certain types of transactions, including some court-ordered and foreclosure transfers, certain transfers between family members or co-owners, certain fiduciary transfers, unimproved property and qualifying never-occupied new construction.
The seller disclosure also does not replace a home inspection. Pennsylvania’s official disclosure form reminds buyers that the statement is not a warranty and that buyers are responsible for evaluating the property’s condition.
For anyone considering a house sale in Philadelphia, PA, this distinction is important: seller disclosure rules deal with the home’s condition, while the Closing Disclosure deals primarily with financing and settlement costs.
What is included in a closing disclosure document?
The Closing Disclosure brings most of the important financial information about your mortgage into one document.
You will typically see:
- Loan details: Your loan amount, loan term, interest rate and loan type.
- Projected monthly payment: Principal and interest, mortgage insurance when applicable, and estimated escrow payments for items such as property taxes and homeowners insurance.
- Closing costs: Lender charges, title and settlement-related charges, government recording or transfer fees, prepaid expenses and initial escrow deposits.
- Cash to close: The final amount you are expected to bring to closing after your down payment, deposit, lender credits, seller credits and other adjustments are calculated.
- Transaction details: Amounts being paid by or credited to the buyer and seller.
- Additional loan information: Details about features such as late-payment charges, escrow, loan assumptions and prepayment penalties when applicable.
The CFPB specifically recommends comparing the loan amount, interest rate, monthly payment, closing costs and Cash to Close with your most recent Loan Estimate.
For buyers, the Cash to Close number deserves special attention. Closing costs are not the same as Cash to Close. Cash to Close is the actual amount you will need to provide at settlement after the other payments and credits in the transaction are taken into account.
Can you be denied after closing disclosure?
Yes. Receiving a Closing Disclosure does not guarantee that your mortgage will close.
Your lender may still have final conditions to verify before the loan is completed. For example, lenders may verify that employment used to qualify for the mortgage is still active shortly before the note date. Under current Fannie Mae guidelines, employment income generally requires verification close to closing, and a change in employment can require the borrower’s ability to qualify to be reevaluated.
That means it is smart to avoid major financial changes between receiving your Closing Disclosure and closing.
For example, be cautious about changing jobs, taking out a new auto loan, opening new credit accounts or making large purchases on credit without first speaking with your lender.
Receiving the Closing Disclosure means you are close to closing, but you are not at the finish line yet.
There is also an important difference between receiving your disclosure and actually completing the transaction. The CFPB notes that a buyer is not committed to the mortgage simply because the Closing Disclosure has been issued; the closing documents still have to be signed.
How do I review a closing disclosure for accuracy?
Start by placing your Closing Disclosure next to your most recent Loan Estimate and compare the numbers line by line.
The CFPB specifically recommends using the three-day review period to resolve questions or errors before closing.
Pay particular attention to:
Your personal and property information.
Make sure your name and the property address are correct.
Loan amount and loan term.
Confirm that they match the mortgage you agreed to.
Interest rate.
If you locked your rate and the number is different, ask your lender why.
Monthly payment.
Check principal, interest, mortgage insurance and estimated escrow.
Closing costs.
Compare lender fees and third-party charges with your Loan Estimate. Some costs can change, but unexpected differences should be explained.
Seller credits.
If the seller agreed to contribute toward your closing costs, make sure those credits appear correctly.
Cash to Close.
Confirm exactly how much money you will need for settlement and ask about anything that changed from your Loan Estimate.
Loan features.
Look for anything unexpected, such as a prepayment penalty or balloon payment.
Not every correction starts another three-day waiting period. Under federal rules, a new three-business-day review period is generally triggered only by certain significant changes, including an inaccurate APR beyond permitted limits, a change to the loan product or the addition of a prepayment penalty.
Never assume a difference is too small to ask about. Your lender or settlement professional should be able to explain where every important number came from.
Buying a home in Philadelphia? Know your numbers before closing
The Closing Disclosure may look complicated at first, but its purpose is simple: to show you what you are agreeing to before you finalize your mortgage.
When buying a house in Philadelphia, use those three business days to slow down and review the details. Compare the document with your Loan Estimate, confirm your interest rate and monthly payment, and make sure you understand exactly how much money you need at closing.
A knowledgeable team of real estate agents can also help you understand where you are in the transaction and coordinate with your lender and settlement company when questions come up.
For buyers searching for a house in PA for sale or comparing realtors in Philadelphia, PA, working with professionals who understand the local buying process can make those final steps much easier to navigate.
*This article is for general educational purposes and is not legal, tax or lending advice. Requirements can vary based on the property, financing and circumstances of the transaction.