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Closing Disclosure Explained

The Closing Disclosure is a standardized five-page form required under the TILA-RESPA Integrated Disclosure (TRID) rule that presents the final terms, costs, and transaction details of a mortgage loan. Lenders must deliver the Closing Disclosure to the borrower at least three business days before loan consummation, giving the borrower time to review and compare the final figures against the original Loan Estimate.

Key Takeaways

  • The Closing Disclosure replaced the HUD-1 Settlement Statement and final TIL disclosure under the TRID rule, effective October 2015.
  • Lenders must deliver the Closing Disclosure at least three business days before consummation. Certain changes, such as an APR increase beyond specified tolerances, restart the three-day waiting period.
  • TRID establishes three tolerance categories: zero tolerance (lender fees, transfer taxes), ten-percent cumulative tolerance (recording fees, lender-list provider fees), and unlimited tolerance (borrower-selected providers, prepaids).
  • Zero-tolerance fee increases must be cured by the lender through a refund to the borrower at or before closing.
  • Borrowers should compare every line item on the Closing Disclosure to the Loan Estimate and request explanations for any changes that exceed tolerance thresholds.
  • Page 3 of the Closing Disclosure reconciles all credits, deposits, and adjustments to determine the cash to close amount. Errors on this page directly affect the borrower's required funds.
  • The Closing Disclosure is the authoritative financial document of the mortgage transaction and should be retained permanently by the borrower.
  • Changes to the loan product or addition of a prepayment penalty also trigger a new three-day waiting period.

How It Works

Delivery and Timing Requirements

The lender is responsible for ensuring the borrower receives the Closing Disclosure at least three business days before consummation. The lender may deliver the CD directly, through a settlement agent, or by mail. When delivered electronically, the borrower must have provided E-SIGN Act consent. The three-day period uses TRID’s definition of business days, which includes Saturdays but excludes Sundays and federal public holidays. For example, if the borrower receives the CD on a Monday, the earliest consummation date is Thursday (assuming no intervening federal holidays).

If the lender discovers that any figures on the Closing Disclosure have changed after delivery, a corrected CD must be provided. If the change is a triggering event (APR increase beyond tolerance, addition of a prepayment penalty, or loan product change), a new three-day waiting period begins upon the borrower’s receipt of the corrected CD. If the change is a non-triggering event, the corrected CD must be delivered at or before consummation but does not restart the waiting period.

Tolerance Enforcement Mechanism

TRID’s tolerance framework protects borrowers from unexpected cost increases between application and closing. The lender tracks all fee changes from the Loan Estimate through each revised Loan Estimate (if applicable) to the final Closing Disclosure. At consummation, if any zero-tolerance fee has increased or if the aggregate of ten-percent-tolerance fees has increased by more than 10%, the lender must cure the excess.

The cure must be provided as a lender credit on the Closing Disclosure or as a refund within 60 calendar days after consummation . The lender cannot pass a tolerance violation on to the borrower. If the lender fails to cure, it faces potential TRID enforcement action from the CFPB, including civil money penalties, restitution orders, and reputational consequences.

Certain events allow the lender to issue a revised Loan Estimate that resets the tolerance baseline. These changed circumstances include borrower-requested changes (such as a different loan amount or property), events that affect settlement charges (such as a new survey revealing title issues), and information specific to the borrower or transaction that was unknown at the time of the original Loan Estimate. The revised Loan Estimate must be provided within three business days of the changed circumstance .

What Each Page Contains

Page 1 provides the loan terms at a glance: loan amount, interest rate, monthly principal and interest, prepayment penalty (yes or no), balloon payment (yes or no), and whether the amounts can increase after closing. The projected payments section shows the monthly payment breakdown over the loan term, including changes that occur with adjustable-rate mortgages or mortgage insurance cancellation.

Page 2 itemizes all closing costs. Section A covers origination charges from the lender. Section B lists services the borrower did not shop for (typically ordered by the lender, such as appraisal and credit report fees). Section C lists services the borrower did shop for (such as title search, title insurance, and survey). Sections D through H cover taxes, government fees, prepaids, and initial escrow payments.

Page 3 presents the cash to close calculation and the transaction summaries. The cash to close table compares the Loan Estimate figures to the final Closing Disclosure figures for each component, showing the borrower exactly where changes occurred. The borrower’s transaction summary lists all amounts due from and credited to the borrower; the seller’s transaction summary does the same for the seller.

Pages 4 and 5 contain loan disclosures, contact information for all parties, the total cost of the loan over its full term, the APR, and the total interest percentage. These pages also include the borrower’s acknowledgment of receipt.

Related topics include your loan estimate, mortgage closing process, mortgage timeline: how long does it take?, and to choose the right mortgage lender.

Key Factors

Factors relevant to Closing Disclosure Explained
Factor Description Typical Range
Three-Day Delivery Timing
TRID Tolerance Categories
APR Triggering Threshold
Cash to Close Reconciliation

Examples

Scenario: Borrower discovers an origination fee increase between the Loan Estimate and the Closing Disclosure.
Outcome: The lender must cure the $250 overcharge by issuing a lender credit on the Closing Disclosure or refunding the amount within 60 calendar days after consummation . The borrower should raise the discrepancy before closing to ensure the credit is applied on the final CD rather than waiting for a post-closing refund.

Scenario: A rate lock expiration coincides with a corrected Closing Disclosure that triggers a new three-day waiting period.
Outcome: The borrower must either accept the risk of a rate lock expiration or negotiate a rate lock extension with the lender. Rate lock extensions typically cost 0.125% to 0.25% of the loan amount . The borrower should have the corrected CD reviewed immediately and confirm all figures are final to avoid further delays.

Scenario: Borrower identifies a missing seller concession on Page 3 of the Closing Disclosure.
Outcome: The settlement agent issues a corrected Closing Disclosure reflecting the $6,000 seller concession. Because the correction does not involve an APR change, prepayment penalty, or loan product change, the new CD does not trigger a new three-day waiting period. The closing proceeds on the original scheduled date with the correct cash to close figure.

Common Mistakes to Avoid

  • Not reviewing the Closing Disclosure during the three-day waiting period
  • Failing to compare the Closing Disclosure to the Loan Estimate line by line
  • Assuming all fee increases on the Closing Disclosure are permissible
  • Confusing the Closing Disclosure delivery date with the consummation date
  • Ignoring changes in the projected payment section that reflect adjustable-rate adjustments or mortgage insurance changes

Documents You May Need

  • Closing Disclosure (all five pages, signed and dated)
  • Original Loan Estimate for side-by-side comparison
  • Any revised Loan Estimates issued during the loan process
  • Purchase contract and amendments (to verify seller concessions, purchase price, and earnest money)
  • Rate lock confirmation (to verify the locked interest rate matches the CD)
  • Title insurance commitment or quote (to verify title insurance charges)
  • Homeowners insurance declaration page (to verify prepaid insurance and escrow amounts)
  • Property tax records (to verify escrow setup and prepaid tax amounts)

Frequently Asked Questions

When will I receive the Closing Disclosure?
Under TRID rules, the lender must ensure you receive the Closing Disclosure at least three business days before the loan consummation date. In practice, most lenders aim to deliver the CD four to five business days before closing to allow time for review, corrections, and any re-disclosure if needed. TRID defines business days as all calendar days except Sundays and federal public holidays.
What should I do if I find errors on the Closing Disclosure?
Contact your loan officer or the settlement agent immediately. Request a corrected Closing Disclosure reflecting the accurate figures. If the error involves a zero-tolerance fee increase, the lender must cure the overcharge. If the correction triggers a new three-day waiting period (APR change beyond tolerance, prepayment penalty addition, or loan product change), the closing date may need to be moved. Do not sign the CD until you are satisfied that all figures are correct.
What is the difference between the Closing Disclosure and the Loan Estimate?
The Loan Estimate is provided within three business days of application and reflects the anticipated terms and costs of the loan. The Closing Disclosure is provided at least three business days before consummation and reflects the final, binding terms and costs. TRID requires that changes between the two documents fall within specified tolerance categories. The CD is the authoritative document that governs the actual transaction.
Can the closing be delayed if the Closing Disclosure changes?
Yes. If a corrected Closing Disclosure includes a triggering change (APR increase beyond tolerance thresholds, addition of a prepayment penalty, or a change in loan product), a new three-day waiting period begins. Non-triggering changes require a corrected CD but do not restart the waiting period. Triggering changes are one of the most common causes of last-minute closing delays.
What are zero-tolerance fees on the Closing Disclosure?
Zero-tolerance fees are charges that cannot increase from the amount disclosed on the Loan Estimate. These include fees paid to the lender (such as origination charges and discount points), fees for required services when the lender selects the provider, and transfer taxes. If any zero-tolerance fee increases, the lender must cure the excess by crediting the borrower at or before closing.
Is the Closing Disclosure the same as the settlement statement?
The Closing Disclosure replaced the HUD-1 Settlement Statement for most residential mortgage transactions as of October 2015 under the TRID rule. The HUD-1 is still used for reverse mortgages, home equity lines of credit (HELOCs), and certain other transaction types not covered by TRID. For standard purchase and refinance transactions, the Closing Disclosure is the applicable settlement document.
Can I waive the three-day waiting period?
In limited circumstances, the borrower may waive the three-day waiting period by providing a written statement describing a bona fide personal financial emergency. The waiver must describe the emergency in the borrower's own words and cannot be provided on a pre-printed form. The CFPB intended this waiver for genuine emergencies, such as an imminent foreclosure on the borrower's current home, not for convenience or scheduling preferences .
Who is responsible for preparing the Closing Disclosure?
The lender is responsible for delivering the Closing Disclosure to the borrower. In practice, the lender may prepare the CD internally or delegate preparation to the settlement agent (title company or closing attorney), but the lender retains regulatory responsibility for the document's accuracy and timely delivery. The settlement agent typically prepares the seller's Closing Disclosure.
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