What Is a Closing Disclosure Form? Example With Timeline
One of the most important forms you’ll receive before you close on a home loan is a closing disclosure, which lays out the final terms and costs of your mortgage. Reviewing this form is your last chance to verify that all of the numbers are correct before your closing.
Understanding how to read your closing disclosure, as well as how to navigate the legally required timeline, will help you correct any errors. Ultimately, your closing disclosure can help you avoid nasty surprises later — like signing a loan that isn’t right for you.
What is a closing disclosure?
A closing disclosure is a five-page legal document that details the final terms of a mortgage loan. In it you’ll find information about your mortgage interest rate, closing costs, the terms of your loan, your monthly payment and many other valuable items of information about your mortgage.
Unlike the loan estimate you received at the beginning of the loan process, which was subject to change, the closing disclosure lists the final details of your loan. Once you approve the closing disclosure and sign your closing paperwork the mortgage process is complete.
Who doesn’t receive a closing disclosure?
You won’t receive a closing disclosure if your loan is:
- For a mobile home that doesn’t have the legal status of real property
- A home equity line of credit (HELOC)
- A reverse mortgage
Instead, you should receive a Truth-in-Lending (TIL) disclosure. However, lenders aren’t required to send your TIL statement ahead of closing.
Why your closing disclosure is important
A closing disclosure gives you one last opportunity to make sure you’re comfortable borrowing based on the terms of the loan you originally applied for. It also holds the lender accountable for the accuracy of its initial quotes and, in some cases, requires the lender pay out of its pocket for fees that weren’t properly disclosed.
It also ensures you have three business days to review all of the numbers and confirm you’ve received credit for anything you’ve prepaid for (like home appraisal fees or earnest money deposits), and that any seller or lender credits have been applied to the amount you owe at closing.
How the closing disclosure 3-day rule works
| If your closing date is on a … | You must receive your disclosure by … |
|---|---|
| Monday | The preceding Thursday |
| Tuesday | The preceding Friday |
| Wednesday | The preceding Saturday |
| Thursday | The preceding Monday |
| Friday | The preceding Tuesday |
| Saturday | The preceding Wednesday |
Lenders are required by law to provide you with a closing disclosure at least three business days before your closing date. In this case, business days are Mondays through Saturdays, and exclude Sundays and federal holidays.
You can take these three days to review the paperwork with your loan officer and, if need be, with an attorney or a regulatory agency if you believe you aren’t getting the terms you originally applied for.
Closing disclosure timeline
| Steps in the closing process | Description | |
|---|---|---|
| Step 1 | 3-day mailing period | The lender must put the closing disclosure in the mail at least three days before it needs to be delivered. (Otherwise, they’ll have to deliver it electronically or by courier.) |
| Step 2 | Delivery of closing disclosure | The closing disclosure reaches the borrower. |
| Step 3 | 3-day waiting period | The borrower reviews the closing disclosure |
| Step 4 | Closing | You’ll sign many documents, including:
|
| Step 5 | 3-day right of rescission period (refinances only) | This period begins only once all three of the following things have occurred:
|
How to review a closing disclosure form
The primary purpose of the closing disclosure is to help you compare your final loan terms to your initial loan estimate to verify the loan terms are what you expect. In general, there shouldn’t be any major changes and the figures should be close to your loan estimate, excepting minor adjustments for interest, property taxes, homeowners insurance and prepaid interest prorations.
You can view an example closing disclosure form at the CFPB’s website.
Below, we’ve highlighted the things you should know on each page when you’re finalizing your mortgage.
Page 1
The first page of your closing disclosure provides a snapshot of the most important features of your mortgage, including:
Loan information. This section should match your loan estimate exactly, showing the same loan term, loan purpose and loan program (conventional or government-backed).
Loan terms. Pay close attention to this section: It features information about your final loan amount, interest rate and monthly payment amount with just the principal and interest calculation.
Projected payments. The projected payments section reflects your total final principal, interest, taxes and insurance (PITI) payment at the time of closing, and then over the life of the loan. The “estimated escrow” amount includes your property taxes and homeowners insurance if you choose to have them included in your payment.
The projected payment may also include mortgage insurance if you’re making less than a 20% down payment on a conventional loan or taking out a Federal Housing Administration (FHA) loan. The most common type of mortgage insurance is private mortgage insurance (PMI), which protects conventional lenders from losses if you default on your payments.
You’ll pay two types of FHA mortgage insurance with an FHA loan: an upfront mortgage insurance premium (UFMIP) and annual mortgage insurance premium (MIP) that is part of your monthly payment.
Costs at closing. This section details your “cash to close,” with a basic breakdown of any costs the seller or your lender is paying on your behalf. You’ll cut a cashier’s check or wire this amount to pay for any remaining closing costs and down payment due on the loan. If the amount doesn’t look right, check the itemizations of all of the credits and charges on Page 2.
Page 2
This page is similar to the old HUD-1 settlement statement borrowers used to review figures on mortgages taken out prior to 2015, and provides an itemized accounting of all the costs of your transaction. The loan costs detailed in sections A, B and C are restricted by federal law.
Costs that can’t change after you sign a closing disclosure
There should be no difference when you compare the following fees to your original loan estimate. If there is, you should see a credit from your lender to pay for it. Fees that can’t change after your closing disclosure has been issued include:
- Origination
- Mortgage points
- Appraisal
- Credit report
- Flood monitoring
- Flood determination
- Tax monitoring
- Tax status research
- Transfer taxes
Costs that can change after you sign a closing disclosure
The other costs are divided up into two categories: Those that can increase by 10% and those that can increase by an unlimited amount.
The fees that are limited to a 10% increase include:
- Recording fees
- Pest inspection fee
- Survey fee
- Title insurance
- Title settlement agent fee
- Title search costs
There are no limits on how much the following fees can increase from the original quote:
- Homeowners insurance premiums
- Property taxes
- Prepaid interest
- Homeowners association (HOA) fees
- Home warranties
Page 3
This information is an extension of Page 2, and provides a summary of all of the itemizations on that page. If you’re receiving any credits from the seller, real estate agent or your lender, they should show up in section L under the “Paid already by or on behalf of borrower at closing” heading.
Page 4
You’ll find a lot of small print related to features of your loan; a few items you should take note of are:
- Late payment fee. This section explains when your payment is considered late and the fee you’ll pay if it is.
- Escrow account. If your homeowners insurance and property taxes are included in your payment, this section breaks down how much will be collected at closing and monthly to keep enough funds in your escrow account to pay your property-related bills when they come due.
Page 5
Your annual percentage rate (APR) is shown on this page. If it’s higher than your interest rate, don’t worry because it’s simply showing how much your closing costs are adding, over and above your loan’s interest. There are some other disclosures that explain what happens if you default on your payments and face foreclosure, and a list of everyone involved in the transaction in case you have questions after your closing.
Why are the costs and interest rate on my closing disclosure different from my loan estimate?
There are only a handful of reasons this could be the case:
- Your rate wasn’t locked in when you submitted your final application
- Your credit scores dropped on the final credit report
- Your income or employment has changed or can’t be verified
- Your home appraised for less than the sales price or the refinance estimate
Frequently asked questions
In most cases, yes. A lender wouldn’t issue a closing disclosure if they didn’t think you could move on to close the loan. Instead, they would deny your loan in underwriting.
Clear to close (CTC) typically comes first, since it means that the lender is ready to draft your closing documents and set a closing date. However, even if you’re CTC, you need to avoid making changes to your employment or credit. It’s still possible to have your loan denied if you quit a job or open new credit accounts.
A loan estimate is a form that details the lender’s best guess about the loan terms you qualify for, based on the preliminary information you provide on a loan application. A closing disclosure is a fully vetted version of the loan estimate, which lists all the fees due from you and owed to you.
Not quite, no. The lender still needs to prepare your closing documents and coordinate the final signing with a title company or attorney.
Yes, although it’s fairly rare. Three things could result in a new three-day waiting period:
- Your APR increases by more than 0.125% on a fixed-rate loan or more than 0.25% on an adjustable-rate mortgage (ARM)
- Your lender assesses a prepayment penalty (not common with standard loan programs)
- You switch loan products (from a fixed-rate loan to an ARM)