Quick Answer
The Closing Disclosure is a federally required form used in many consumer mortgage transactions. It summarizes the final loan terms, projected payments, closing costs, and cash to close. It replaced the HUD-1 Settlement Statement and the Truth-in-Lending disclosure for covered mortgage loans.
If you are getting a mortgage to buy a home, the Closing Disclosure (CD) is one of the most important documents you will receive. It tells you the final terms of your loan and exactly what you will pay at closing.
What Does It Show?
The Closing Disclosure provides detailed information about the mortgage loan, including:
- Loan terms: The loan amount, interest rate, whether the rate can adjust, and the monthly principal and interest payment
- Projected payments: Estimated total monthly payment including principal, interest, mortgage insurance, and taxes and insurance escrows
- Closing costs: Itemized list of all lender fees, third-party fees, taxes, and prepaid items
- Cash to close: The total amount the borrower needs to bring to closing, including down payment and closing costs
- Comparison information: Annual percentage rate (APR), total interest percentage (TIP), and total amount paid over the life of the loan
Why Does It Matter?
The Closing Disclosure matters because it is the final, legally required disclosure of the loan terms before closing. Federal law gives you the right to receive the CD at least three business days before closing (the TRID waiting period). This allows you time to review the terms and compare them with the Loan Estimate you received earlier. You have the right to ask questions about any differences.
Who Prepares It?
The lender is responsible for preparing the Closing Disclosure, not the title company. However, the title or escrow company provides the lender with the settlement information needed to populate the disclosure. The lender delivers the CD to the borrower and ensures the three-business-day waiting period is observed.
Is It the Same as the Settlement Statement?
Not exactly. The Closing Disclosure is a federal form required for most consumer mortgage transactions. A settlement statement may be a different document in cash transactions, commercial deals, or transactions that are not covered by TRID rules. See Settlement Statement vs. Closing Disclosure for a detailed comparison.
What Should Buyers Check on the Closing Disclosure?
Buyers should compare the Closing Disclosure to the Loan Estimate they received earlier. Key items to verify include:
- The interest rate and loan terms match what was quoted
- Closing costs have not increased significantly without explanation
- The cash to close amount is affordable and expected
- Your name, property address, and loan details are correct
- Any credits or seller contributions are properly reflected
Key Takeaway
The Closing Disclosure is a federal form that summarizes your final loan terms and closing costs in a consumer mortgage transaction. It is prepared by the lender and must be delivered at least three business days before closing. Review it carefully and compare it with your Loan Estimate.
FAQs
What if the Closing Disclosure changes after I receive it?
If changes occur, the lender may need to provide an updated CD and may need to allow a new three-business-day waiting period if the change is significant. Certain changes such as a change in APR, loan product, or a prepayment penalty trigger a new waiting period.
Do I need to sign the Closing Disclosure?
Yes, you will typically sign or acknowledge the Closing Disclosure at closing. You should also receive a copy to keep for your records. Review it before signing and ask questions about anything you do not understand.