Closing Disclosure explained: what to check before you sign

The Closing Disclosure is the standard five-page form that shows the final terms and costs of your mortgage. For most mortgages it replaced the older HUD-1 settlement statement and Truth in Lending disclosure in 2015. Pages 1 and 2 follow the same layout as your Loan Estimate, so you can compare the two line by line.

Your lender is responsible for it, though the settlement agent (a title or escrow company, or an attorney) often prepares and sends it.

You must receive your Closing Disclosure at least three business days before closing. Technically the deadline is consummation, the moment you become legally bound on the loan, which is usually when you sign. For this rule, a business day is every day except Sundays and federal public holidays, so Saturdays count.

If the disclosure isn't handed to you in person, you're treated as receiving it three business days after it's sent, unless there's proof you got it sooner. That's why lenders often send it earlier than three days out.

Most changes after you receive it just mean a corrected Closing Disclosure at or before closing. Only three kinds of change restart the three-business-day wait:

• the APR goes up by more than a narrow margin (on a typical fixed-rate loan, more than 1/8 of a percentage point)
• the loan product changes, for example from a fixed rate to an adjustable rate
• a prepayment penalty is added

Page 1: loan terms and payments

Closing information (date issued, closing date, disbursement date, settlement agent), the people involved (you, the seller if there is one, and the lender) and loan information (term, purpose, product, loan type). Then the same Loan Terms, Projected Payments and Costs at Closing tables you saw on your Loan Estimate.

Page 2: closing cost details

Sections A through J again, now with columns showing who pays each fee: you (at closing or before closing), the seller, or others. Section B is renamed "Services Borrower Did Not Shop For" and Section C "Services Borrower Did Shop For." A fee that sat in Section C on your Loan Estimate can move to Section B if you used a company from the lender's list. That's normal.

Page 3: cash to close and summaries

The Calculating Cash to Close table compares your Loan Estimate figures with the final ones (more on that below). For a purchase, the Summaries of Transactions show what you and the seller each owe and are credited. Refinances often use a version with a Payoffs and Payments table listing debts paid with your loan.

Page 4: loan disclosures

Whether the loan can be assumed by a buyer, late payment terms, whether the balance can grow (negative amortization), how partial payments are handled, and your escrow account: what it pays and the estimated yearly amounts. Adjustable-rate loans get extra tables here.

Page 5: loan calculations and contacts

The total of payments, finance charge, amount financed, APR and Total Interest Percentage, followed by other disclosures and contact details for your lender, any mortgage broker, the real estate brokers and the settlement agent.

Start with the loan itself. The loan amount, loan type, product and term should match what you agreed to. If your rate is locked, so should the interest rate and the monthly principal and interest. Differences are fine only if you asked for a change or your lender issued a revised Loan Estimate for a valid reason.

Then check the costs against the federal tolerance limits:

• Can't go up at all without a valid reason: origination charges in Section A, fees for services you weren't allowed to shop for, and transfer taxes.
• Can go up 10% as a group: recording fees plus services you chose from the lender's list of providers.
• Can change: prepaid interest, homeowner's insurance and escrow deposits, often because the closing date or final premiums changed.
• Lender credits shouldn't shrink without a valid reason, since a smaller credit means you pay more.

The TRID tolerance guide explains each group, with examples, and the reasons a lender can use to revise its estimate.

The Calculating Cash to Close table on page 3 is the fastest way to spot changes. For each part of your cash to close (total closing costs, closing costs paid before closing, closing costs financed, down payment, deposit, funds for borrower, seller credits, and adjustments and other credits) it lists the Loan Estimate amount and the final amount. The "Did this change?" column says Yes or No and usually points you to where the change is.

If your closing costs went over the legal limits and the lender has accounted for it, the closing costs row notes that the increase exceeds legal limits, and page 2 shows a lender credit for the excess.

A "No" is a good sign, but it only compares totals. An increase in one fee can be hidden by a decrease in another, so check the individual lines on page 2 as well.

Cash to close is what you bring to closing. It commonly moves because of:

• changes in closing costs
• fees you paid before closing, such as the appraisal, which reduce what's due at the table
• your earnest money deposit and any seller credits (purchases)
• property taxes or HOA dues split between you and the seller for the part of the year each of you owns the home
• payoffs of your old mortgage or other debts (refinances)

Ask your settlement agent to walk you through any line you don't understand.

1. Names, property address and loan details are correct.
2. Loan amount, rate, term, product and monthly payment match what you agreed to.
3. No prepayment penalty or balloon payment you didn't expect.
4. Section A isn't higher than on your Loan Estimate (or a valid revised one).
5. Fees for services you couldn't shop for and transfer taxes haven't gone up without a reason.
6. Recording fees plus services from the lender's list are within 10% of the Loan Estimate total.
7. Lender credits are no smaller than before.
8. You understand each Yes in the "Did this change?" column.
9. For a refinance, each payoff is a debt you agreed to pay off with the loan.
10. The escrow details on page 4 match what you expected.

Raise it with your loan officer and settlement agent as soon as you can, in writing. Ask what changed and why. If the lender says there was a valid reason, ask to see the revised Loan Estimate or other documentation. Many mistakes can be fixed with a corrected Closing Disclosure before closing.

If you were charged more than the rules allow, the lender can fix it by refunding the excess within 60 days after closing, along with a corrected Closing Disclosure. If you can't resolve a problem with your lender, you can submit a complaint to the CFPB (opens in a new tab). For advice about your own situation, talk to a real estate attorney or a HUD-approved housing counselor.