The Closing Disclosure is the five-page federal form summarising your final loan terms and costs. It replaced the old HUD-1 in 2015 and is designed to be compared directly against your Loan Estimate.
The three-business-day rule
You must receive it at least three business days before consummation. The purpose is to give you time to review without pressure.
Only three changes restart the clock:
- The APR becomes inaccurate beyond tolerance
- The loan product changes — fixed to ARM, for example
- A prepayment penalty is added
Other changes, including most fee adjustments, are issued as a revised CD without a new waiting period.
Page by page
Page 1 — Loan terms and projected payments
Loan amount, rate, monthly principal and interest, and whether any of these can increase. The “Can this amount increase after closing?” column is the most important thing on the page. On a fixed-rate loan the answers should all be “No” except for escrow.
Also here: estimated total monthly payment and estimated cash to close.
Page 2 — Closing cost details
The itemisation, in labelled sections:
- A. Origination charges — points, origination fee, underwriting
- B. Services you did not shop for — appraisal, credit report, flood certification
- C. Services you could shop for — title, settlement, survey, pest inspection
- D. Total loan costs
- E. Taxes and government fees — recording, transfer tax
- F. Prepaids — interest, first-year insurance, initial tax
- G. Initial escrow deposit
- H. Other — owner’s title policy commonly appears here
Section C is the one worth studying. Those are the services you were entitled to shop for, and comparing what you were charged against what you could have paid is instructive — if only for next time.
Page 3 — Calculating cash to close, and the comparison table
Two important pieces. The left side reconciles your Loan Estimate against final figures, with a “Did this change?” column. The right side, on purchases, is the summary of transactions for both parties.
Read every “Yes” in that Did-this-change column and make sure you understand each one.
Page 4 — Loan disclosures
Assumption, demand feature, late payment terms, negative amortization, partial payment policy, escrow account details, and — critically — whether the loan has a prepayment penalty. Rare on conventional loans, more common on some non-QM products.
Page 5 — Loan calculations and contact information
Total of payments, finance charge, amount financed, APR and total interest percentage. The “Total of Payments” figure is sobering and worth looking at once.
Tolerance categories
How much a fee may increase from the Loan Estimate depends on its category:
- Zero tolerance — cannot increase at all: origination charges, points, fees to the lender or an affiliate, and services you were not permitted to shop for
- 10% cumulative — recording fees and services you shopped for from the lender’s written list may increase, but not more than 10% in aggregate
- No tolerance — prepaid interest, insurance premiums, escrow deposits, and services you shopped for outside the lender’s list
If a zero-tolerance fee increased, the lender must cure it — usually as a credit at closing. This does happen, and pointing it out politely is entirely reasonable.
The comparison worth doing
Put your first Loan Estimate next to the Closing Disclosure and check, in order: rate, loan amount, term, product type, points, section A total, section C total, and cash to close. Anything that moved should have an explanation.
Common questions
The APR becoming inaccurate beyond tolerance, the loan product changing, or a prepayment penalty being added. Most other changes do not.
It depends on the tolerance category. Some fees cannot increase at all, some by up to 10% in aggregate, and some without limit.
General information, not advice on your specific situation. Guidelines, limits and pricing change, and vary by lender, programme and state. Nothing here is a commitment to lend or an offer of credit. For tax or legal questions, consult a qualified professional.
Sree Basireddy · Mortgage Loan Officer, NMLS 2705737 · Loan Factory, Inc., NMLS 320841 · Equal Housing Opportunity