What is the closing disclosure?
Closing disclosure is a five-page statement containing final details of the mortgage and closing costs. Your mortgage lender must provide closing disclosure at least three business days prior to closing. This gives you time to compare the final terms and costs, information previously given in the loan estimate, and the three-page document you received when you obtained the mortgage offer. If you are unsure whether something is wrong or surprising, please inform your lender or ask for clarification before closing.
The importance of closing disclosure
Closing disclosure gives you a final opportunity to review the terms of your mortgage, ask questions, and understand what you are committed to. Importantly, it also informs you of the exact amount you need to pay when you close, and the amount you will pay in total over time on your mortgage.
Additionally, with closing disclosure, the lender is liable for the fees cited (with some exceptions – details below) and to minimize delays in termination.
What are the 3-day rules for closing disclosures?
The “Know Before You Own” Mortgage Rules or the closing disclosure three-day rule, officially known as the TRID (Tila-Respa Integrated Disclosure Rules), came into effect in 2015. Lenders can provide direct closing disclosures, such as by email, via mail or electronically.
Use three business days to check all terms of your mortgage and talk to your lender, lawyer, or settlement agent if you have any questions.
You are entitled to a new 3-day review period if your termination disclosure contains one or more of the following inaccuracies:
- If APR increases by 8 or more on fixed-rate loans, then 1/4 percent on adjustable loans
- If the lender adds an advance penalty
- If the loan product is changed
For small issues like typos, new 3-day reviews are not available, but lenders still need to provide updated disclosures.
What is included in the closing disclosure?
Each section of closing disclosure breaks down the terms and characteristics of the loan, as well as related costs and fees.
| Loan terms | If applicable, check the amount of loan, monthly payments, interest rates, advance penalties, balloon payments, and whether the amount may increase after closing. |
| Projected payments | These include monthly mortgage payments as well as principal, interest, mortgage insurance (if applicable), and estimated escrow and estimated taxes, insurance and valuations. Both can increase over time. |
| Costs at closing | This section shows advance fees, sometimes referred to as “settlement costs.” This includes loan costs, lender credit and the amount you need to pay when closing. |
| Loan fee | This section includes fees such as application fees, origination fees, and optional points. It also points out items that sellers should pay for. Loan costs are categorized as “services that the borrower did not shop,” including credit reports and valuations, and services that the borrower made purchases, such as settlement agent fees and title searches. |
| Other costs | These include recording fees, taxes (if applicable), and insurance premiums at signing. |
| Calculate cash to close | This table breaks down the costs at closing, including deposits, credits, and things that have been varied since the lender has given you a quote for your loan. |
| Transaction Overview | This allows you to consider your costs in detail, including home prices, closing costs, and seller costs. |
| Loan disclosure | Here you will see a legal language that describes the key characteristics of a loan, such as assumptions, demand features, negative amortization, and escrow. |
| Loan calculation | This disclosure shows the total amount you agree to pay over the life of the loan, including interest fees. |
| Other disclosures | This includes details such as valuations, missed payments, and other aspects of the loan. |
| contact address | This includes details on how to reach all parties involved in the loan. |
| Please check the receipt | Sign this page when closed and you will know that you have received it. |
Sample closure disclosure
The closure disclosure of this sample from the Consumer Financial Protection Bureau (CFPB) includes an interactive checklist on the right side of the document.
How to check closed disclosures
Because the latest loan estimates are convenient, go through each line of closed disclosure and compare the following two documents:
- Check the spelling of your name.
- Check the property address.
- Make sure the loan amount and description match the loan estimate.
- Reconfirm your loan type, interest rate, monthly payments and other terms.
- Make sure you understand all costs and fees and see if new costs have been added.
- Check if your lender is using an escrow account and see how it works.
If anything in the closing disclosure appears to be incorrect, notify your lender and attorney or settlement agent as soon as possible. Depending on the nature of the error, the documentation may need to be revised and may delay the deadline. Do not apply pressure to close without amended closure disclosure.
What can and cannot be changed in closing disclosures
Some costs of closing disclosures will change, but others cannot. The lender will not intentionally keep your costs down and then raise prices when it closes.
Generally, if any of the following changes from your loan estimate, or if it appears unfamiliar, contact your lender for an explanation.
- Loan information: In this section, you should match your loan estimate.
- Loan amount: For example, note that if the closing costs are rolled, the amount of the loan may vary.
- interest rate: If you lock your rate, your fees will not change unless your application details, such as your credit profile or income, are changed.
- Estimated Total Monthly Payment: This could change. Therefore, make sure you can afford the amount stated during the mortgage period.
- Service borrowers did not shop: These are third-party services that lenders need to process their loans, such as valuation fees and credit reports. Compare these services with loan estimates.
- Service borrowers have made a purchase: Fees for services you shop for related to your mortgage are listed here, including pest testing, title search, or surveys.
- Closure fee/Cash to close: The terms are similar, but do not mean the same thing. Cash for closing includes closing costs and remaining down payment.
Please note that some closure costs cannot be increased, such as fees paid to lenders or mortgage brokers, fees for necessary services that they did not shop separately, or expenses paid from the lenders or mortgage broker affiliates. Transfer taxes cannot be increased either.
Other closure costs may increase without restrictions, including prepaid interest, insurance premiums, initial escrow account deposits, and fees for certain third-party services that lenders do not require.
There is a third category of closure costs that are allowed to increase by up to 10%. These include recording fees and fees from third-party service providers. If circumstances change, these costs can increase by more than 10%.
If you are worried about closing costs, you can negotiate with your lender or consider a mortgage that costs the closing costs.
Please note: If there is a “change in circumstances” that requires a new loan estimate, the costs may change depending on any amount. Changes in situations could, for example, decide to get a different type of loan or place a different amount.
