Before you sign anything
Five pages, three tolerance buckets, three business days
The Closing Disclosure is the most consequential document you will sign, and almost nobody is shown how to read it. Here is what each page is for and which numbers are allowed to move.
Open a page at a time
What is actually on each page
Read page one first, then jump to page three. Those two carry almost every number that can surprise you at the table.
The five loan terms sit in a box at the top with a yes or no beside each: can the loan amount, the interest rate or the monthly principal and interest increase after closing, and is there a prepayment penalty or a balloon payment. Underneath, the projected payments table shows every year in which the payment changes, usually because mortgage insurance drops off. The bottom line is the cash to close.
Read the five yes/no answers first. A yes on any of them that you did not expect is the single most important thing on the document.
A is origination charges. B is services you could not shop for. C is services you could shop for. E is taxes and government fees. F is prepaids: per-diem interest, the first year of hazard insurance, any property tax due. G is the initial escrow deposit, shown month by month. H is other, where the owner's title policy usually sits. J is the total closing costs, including any lender credits shown as a negative number.
Compare section by section against your Loan Estimate, not total against total. A drop in one section can hide an increase in another.
The left column restates the Loan Estimate figure, the right column restates the final figure and the last column says whether each line changed and why. Below that, the borrower's transaction and the seller's transaction are summarised side by side, which is where seller credits, adjustments for taxes already paid and the payoff of any existing loan appear.
The did-this-change column is the lender's own explanation of every difference. If the explanation is blank on a line that moved, ask before you sign.
Assumption, demand feature, late payment grace period and fee, negative amortization, partial payment policy, the security interest in the property, and the escrow account box. The escrow box states the annual escrowed amount, the non-escrowed amount you still owe yourself, and the escrow waiver fee if you declined the account.
The partial payment policy tells you whether the servicer will hold a short payment in a suspense account instead of applying it. That is how borrowers accidentally go delinquent.
Total of payments, finance charge, amount financed, the annual percentage rate and the total interest percentage, which expresses total interest as a share of the loan amount. Below sit the appraisal, contract details, liability after foreclosure and refinance statements, then the contact block for every party with their licence identifiers.
The total interest percentage is not the interest rate and not the APR. It is how much interest you pay over the full term, expressed against the amount borrowed.
Zero tolerance
These cannot rise at all between the Loan Estimate and closing unless a valid changed circumstance is documented.
- Origination charges
- Discount points you locked
- Fees paid to the lender, the broker or an affiliate
- Fees for services you were not allowed to shop for
- Transfer taxes
10% cumulative
These may move individually, but the total of the group may not exceed the Loan Estimate total by more than 10%.
- Recording fees
- Services you could shop for, taken from the lender's written provider list
- Third-party fees where the provider came from that list
No tolerance
These are outside the lender's control and may change without any cure being owed.
- Prepaid interest to the end of the month
- Homeowner's insurance premium
- Initial escrow deposit
- Property taxes
- Services you shopped for outside the lender's written list
A worked tolerance check
| Line | Loan Estimate | Closing Disclosure | Bucket | Outcome |
|---|---|---|---|---|
| Origination charge | $1,495 | $1,495 | Zero | No change |
| Appraisal (no shopping allowed) | $725 | $825 | Zero | Cured: $100 credited |
| Recording fees | $285 | $310 | 10% | Inside the group total |
| Title, settlement and endorsements | $1,980 | $2,105 | 10% | Inside the group total |
| Prepaid interest, 11 days | $864 | $942 | None | Closing date moved, no cure owed |
Scroll the table sideways
The ten percent group moved from $2,265 to $2,415, a rise of 6.6%, so it stays inside the bucket and nothing is owed. The appraisal sits in the zero bucket and rose $100 with no changed circumstance, so the lender credits that $100 back at the table and reissues the disclosure.
Sample figures throughout, drawn to show how the arithmetic works rather than to quote any particular file.
The three business day rule
You must receive the Closing Disclosure at least three business days before you sign. Saturdays count, Sundays and federal holidays do not. Three changes restart the clock from zero:
- The APR becomes inaccurateMore than 0.125% off on a fixed-rate loan, or 0.25% on an adjustable rate.
- The loan product changesFixed to adjustable, a different term, or an interest-only feature added.
- A prepayment penalty is addedAny prepayment penalty introduced after the Closing Disclosure was issued.
Everything else, a corrected fee, a new seller credit, a changed loan amount, is fixed with a corrected disclosure at or before the table and does not delay your closing.
The questions that come up at the table
If one of these is still unanswered an hour before signing, stop and call us. A corrected disclosure is cheap; a wrong loan is not.
They are the same document at two points in time. The Loan Estimate arrives within three business days of your application and is a good faith projection. The Closing Disclosure arrives at least three business days before signing and is final. The tolerance rules exist to keep the second honest about the first.
Both. The rate prices your monthly interest. The APR expresses the rate plus the financed cost of getting the loan, spread across the term. A wide gap between them usually means points or heavy lender fees, which is worth a conversation before you sign.
Yes. Per-diem interest sits in the no tolerance bucket because it depends entirely on the closing date. Move the date later in the month and it falls, earlier and it rises. Nothing is owed to you when it moves.
If a zero tolerance fee rises with no documented changed circumstance, the lender must refund the difference. It is normally credited on the Closing Disclosure itself, or paid within 60 days of closing with a corrected disclosure. You do not have to ask, but you should check.
Yes, and you should. We issue the Closing Disclosure as soon as the file is clear to close, which is usually five to seven days out, so there is room to question a line without moving the closing date.
We issue the disclosure early, on purpose
Clear to close means the document goes out, not that it sits until day three. You get time to read it, and time to ask.
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