Understanding Your Mortgage Closing Disclosure: A Complete Guide

The Mortgage Closing Disclosure is one of the most important documents you’ll receive during the home buying process, yet many borrowers find it confusing or overwhelming. This comprehensive guide breaks down what the Closing Disclosure is, when you’ll receive it, and how to review it effectively to ensure a smooth closing experience.

What Is a Mortgage Closing Disclosure?

The Closing Disclosure (CD) is a five-page form that provides the final details about your mortgage loan, including the loan terms, projected monthly payments, and closing costs. This document replaced the previous HUD-1 Settlement Statement in 2015 as part of the Know Before You Owe mortgage initiative implemented by the Consumer Financial Protection Bureau (CFPB).

The Closing Disclosure is designed to be consumer-friendly, making it easier to understand the exact terms of your mortgage before you sign the final paperwork. It allows you to compare your final loan terms and costs to the estimates provided in the Loan Estimate you received when you first applied for the mortgage.

When Will You Receive Your Closing Disclosure?

By law, lenders must provide the Closing Disclosure at least three business days before your scheduled loan closing. This mandatory waiting period, known as the “three-day rule,” gives you time to:

• Review the document thoroughly
• Compare it to your Loan Estimate
• Ask questions about anything you don’t understand
• Address any errors or discrepancies

If certain significant changes are made to your loan after you receive the Closing Disclosure, the lender must provide a new disclosure and the three-day waiting period starts again. These significant changes include:

• Changes to the APR of more than 1/8 of a percentage point for fixed-rate loans or 1/4 of a percentage point for adjustable-rate loans
• Addition of a prepayment penalty
• Changes to the loan product (such as switching from a fixed-rate to an adjustable-rate mortgage)

Breaking Down the Five Pages of the Closing Disclosure

Page 1: Loan Terms and Projected Payments

The first page provides a summary of your loan’s key details:

• Loan Information: Loan term, purpose, product type, and loan type
• Loan Terms: Loan amount, interest rate, monthly principal and interest payment, and whether these amounts can increase after closing
• Projected Payments: A breakdown of your monthly payments, including principal and interest, mortgage insurance (if applicable), and estimated escrow payments for taxes and insurance
• Costs at Closing: A summary of your closing costs and the total cash needed to close

This page gives you a quick overview of what you’re borrowing and what you’ll be paying over the life of the loan.

Page 2: Closing Cost Details

The second page itemizes all closing costs associated with your loan:

• Loan Costs: Origination charges, services you cannot shop for (like appraisal fees), and services you can shop for (like title insurance)
• Other Costs: Taxes, prepaids (like homeowners insurance premiums and prepaid interest), initial escrow payments, and other fees
• Total Closing Costs: The sum of all costs, including any lender credits

This detailed breakdown helps you understand exactly what you’re paying for and identify any unexpected charges.

Page 3: Cash to Close and Summaries of Transactions

The third page shows:

• Calculating Cash to Close: A comparison between the estimates provided earlier and the final figures, showing any changes
• Summaries of Transactions: A detailed accounting of all the money flowing in and out for both the borrower and seller

This page helps you understand how much money you’ll need to bring to closing and reconciles all the financial aspects of the transaction.

Page 4: Additional Loan Information

The fourth page contains important information about your loan servicing and other features:

• Loan Disclosures: Information about assumptions, demand features, late payments, negative amortization, partial payments, and escrow account details
• Loan Calculations: Total of payments, finance charge, amount financed, annual percentage rate (APR), and total interest percentage (TIP)
• Other Disclosures: Information about appraisal, contract details, liability after foreclosure, refinancing, and tax deductions

This page contains technical but important details about how your loan works and your rights as a borrower.

Page 5: Contact Information and Signature

The final page includes:

• Contact Information: Details for all parties involved in the transaction (lender, mortgage broker, real estate agents, etc.)
• Loan ID Information: NMLS IDs and other identifying information
• Signature Line: Where you’ll sign to acknowledge receipt of the disclosure (not to accept the loan terms)

This page ensures you know who to contact if you have questions about any aspect of your loan or the closing process.

How to Review Your Closing Disclosure Effectively

Step 1: Compare to Your Loan Estimate

Place your Loan Estimate side by side with your Closing Disclosure and verify that:

• The loan amount matches what you requested
• The interest rate is what you were promised
• The loan term (e.g., 30 years) is correct
• The loan type (conventional, FHA, VA, etc.) is accurate
• The monthly payment aligns with your expectations

Some costs may have changed slightly, but significant differences should be explained by your lender.

Step 2: Review Closing Costs Carefully

Pay special attention to the closing costs section on page 2:

• Verify that lender fees match what was disclosed in your Loan Estimate
• Check that third-party fees are reasonable and explained
• Confirm that any seller credits or lender credits are correctly applied
• Look for any unexpected fees or charges

According to CFPB regulations, certain fees cannot increase by more than 10% from your Loan Estimate, while others cannot change at all.

Step 3: Verify Cash to Close Amount

The “Cash to Close” figure on page 1 tells you exactly how much money you need to bring to closing. Ensure this amount matches your expectations and that you’re prepared to provide these funds in the acceptable form (typically a cashier’s check or wire transfer).

Step 4: Check for Errors

Common errors to look for include:

• Misspelled names
• Incorrect property address
• Wrong loan terms or type
• Duplicate fees
• Missing credits or concessions
• Mathematical errors in calculations

Even small errors should be addressed immediately to avoid delays at closing.

What to Do If You Find Discrepancies

If you identify errors or have questions about your Closing Disclosure:

1. Contact your loan officer immediately – Don’t wait until closing day to address issues
2. Request written explanations for any significant changes from your Loan Estimate
3. Ask for a revised Closing Disclosure if necessary
4. Consider consulting with a real estate attorney if you have serious concerns

Remember that some changes may trigger a new three-day waiting period, so addressing issues promptly is essential to avoid closing delays.

Common Questions About the Closing Disclosure

Is the Closing Disclosure the same as a Loan Commitment?

No. A loan commitment is the lender’s promise to provide a mortgage loan under specific terms, while the Closing Disclosure is a detailed breakdown of the final loan terms and closing costs.

Do I need to sign the Closing Disclosure?

Yes, you’ll typically sign the Closing Disclosure to acknowledge receipt, but this signature doesn’t commit you to the loan. The final loan documents are signed at closing.

Can my Closing Disclosure change after I receive it?

Yes, in certain circumstances. If there are changes to your loan terms or costs, you may receive a revised Closing Disclosure. Significant changes will restart the three-day waiting period.

What if my closing is delayed after I receive the Closing Disclosure?

If your closing is delayed but the loan terms remain the same, you typically won’t need a new Closing Disclosure. However, if the delay affects costs (such as rate lock extensions), you may receive an updated disclosure.

Key Differences Between the Loan Estimate and Closing Disclosure

While the Loan Estimate and Closing Disclosure contain similar information, there are important differences:

• The Loan Estimate provides estimated costs based on information available at application
• The Closing Disclosure shows the final, actual costs you’ll pay at closing
• The Closing Disclosure is more detailed, particularly regarding the breakdown of costs
• The Closing Disclosure includes information about loan calculations and disclosures not found on the Loan Estimate

Understanding these differences helps you properly compare the two documents.

Closing Disclosure Timeline: What Happens Next?

After receiving your Closing Disclosure:

1. Three-day review period: You have at least three business days to review the document
2. Final walkthrough: Typically conducted 24 hours before closing to verify the property’s condition
3. Closing day: You’ll sign final loan documents and pay closing costs
4. Funding: The lender releases funds to the seller
5. Recording: The deed and mortgage are recorded with the county

This timeline ensures you have adequate time to review all details before committing to the loan.

Conclusion: The Importance of Understanding Your Closing Disclosure

The Closing Disclosure is more than just another document in the mortgage process—it’s your final opportunity to verify that all loan terms and costs are as expected before you commit to the mortgage. Taking the time to review this document thoroughly can help you avoid surprises at closing and ensure that you’re getting the loan you were promised.

By understanding each section of the Closing Disclosure and knowing what to look for, you can approach your mortgage closing with confidence and peace of mind. If you’re uncertain about any aspect of your Closing Disclosure, don’t hesitate to ask questions—your loan officer, real estate agent, or attorney can provide clarification and help you address any concerns before closing day.

Remember that the three-day review period is a consumer protection measure designed for your benefit. Use this time wisely to ensure that your mortgage closing goes smoothly and that you fully understand the financial commitment you’re about to make.