What is the purpose of a closing disclosure?

The purpose of a closing disclosure is to provide a transparent document that outlines the final terms and costs associated with a mortgage loan. This document is required by law and is crucial for borrowers because it offers a detailed breakdown of the amounts charged for the loan, including interest rates, closing costs, and any other fees that the borrower will need to pay at closing.

The closing disclosure allows borrowers to review all costs associated with their mortgage in one place before the transaction is finalized, ensuring they have a clear understanding of the financial commitment they are making. This process promotes informed decision-making and helps to avoid any surprises at the closing table, reinforcing the consumer’s rights in the loan process.

In contrast to the other choices, the legal transfer of property ownership is achieved through a different document, typically the deed. Appraisal values are essential for determining the worth of the property but are not included in the closing disclosure. A summary of the mortgage application process would not encompass the specific financial details that the closing disclosure highlights, making the first option the most relevant and accurate representation of the document's purpose.