Comparing Your Loan Estimate to Your Closing Disclosure Form

When buying a home, a final walk-through helps ensure that, at closing, your house is “identical” (in the same condition) to the one you agreed to buy. Similarly, you want to make sure your mortgage terms and conditions haven’t changed.

That’s (partially) what the Consumer Financial Protection Bureau’s (CFPB) Closing Disclosure form is intended to accomplish (in conjunction with the Loan Estimate form)

The Closing Disclosure was designed to replace two older forms (the HUD-1 and the revised Truth in Lending disclosure) and provides a summary of the final terms of your loan. Like the Loan Estimate form, simplified language makes the form easier to understand. You can use the two forms together to spot any discrepancies with your original Loan Estimate.

Lenders are required to provide the five-page Closing Disclosure form at least three business days before closing. This gives adequate time for you to review the details of the closing document and ask any questions you may have, prior to closing.

The Closing Disclosure form tells you (among other things):

  • If there is a prepayment penalty
  • If the loan has a demand feature (which would force you to pay off the loan early)
  • If there are any balloon payments in your future
  • The full cost of the loan (and total interest to be paid)
  • Which figures have changed since the Loan Estimate form, and why
  • What your escrow payments will be and what they cover
  • How much real estate agents are being paid
  • If partial mortgage payments are permitted
  • If a negative amortization situation can occur with your loan

Although the Closing Disclosure form is five pages long and the Loan Estimate form is only three pages long, the layouts mirror important pages. For a full review of details and definitions, outlined on a sample Closing Disclosure form, visit the CFPB’s Closing Disclosure Explainer page.