The Closing Disclosure is the most important document you will review before signing on your new home. It is a five-page form that spells out the final terms of your mortgage and every cost associated with your closing. Understanding how to read it can save you thousands of dollars and prevent costly mistakes.
By law, your lender must provide you with the Closing Disclosure at least three business days before your closing date. This is not a document to skim. It is your final opportunity to verify that the numbers are correct before you commit to a loan that could last 30 years.
I have walked hundreds of buyers through their Closing Disclosures, and I have seen errors more often than you might expect. Small mistakes in loan terms, fees, or escrow amounts can add up to significant money. This guide teaches you exactly what to look for on each page.
What Is a Closing Disclosure?
The Closing Disclosure, often called the CD, is a standardized five-page form created by the Consumer Financial Protection Bureau (CFPB). It replaced the old HUD-1 Settlement Statement in 2015 as part of the TILA-RESPA Integrated Disclosure (TRID) rule. The CD provides a complete picture of your loan terms, projected monthly payments, closing costs, and other details of your transaction.
Your lender is required to send you the CD at least three business days before closing. If any significant changes are made to the loan terms after you receive the CD, the clock resets and you must receive an updated version with another three-day review period.
Page 1: Loan Terms and Projected Payments
The first page of your Closing Disclosure contains the most important information about your loan:
- Loan amount: The total amount you are borrowing
- Interest rate: Your fixed or adjustable rate
- Monthly principal and interest: Your base payment before taxes and insurance
- Prepayment penalty: Whether you can pay off the loan early without a fee
- Balloon payment: Whether you have a large lump sum due at the end of the loan term
- Projected payments: A table showing how your payment changes over time, including principal, interest, mortgage insurance, and estimated escrow amounts
What to check: Verify that the loan amount, interest rate, and monthly payment match what you agreed to in your Loan Estimate. If the rate has changed, ask why. If the payment is higher than expected, dig into the details.
Page 2: Closing Cost Details
Page 2 is where the real detail lives. It breaks down your closing costs into two main sections:
Section A: Origination Charges
These are fees charged by your lender. They include the origination fee, discount points, application fee, underwriting fee, and any other lender-specific charges. Some of these fees are negotiable, so compare them to your Loan Estimate and question any increases.
Section B: Services You Cannot Shop For
These are services required by the lender that are provided by third parties. Examples include the appraisal fee, credit report fee, and flood certification. You cannot choose these providers yourself, but the fees should be reasonable and match your estimate.
Section C: Services You Can Shop For
These are services where you can choose your own provider. Examples include the home inspection, pest inspection, and title insurance. If you shopped around and found a better price, make sure the CD reflects the provider you selected.
Section D: Taxes and Government Fees
This section includes recording fees, transfer taxes, and other government charges. These are typically non-negotiable, but you should verify they match your expectation.
Section E: Prepaids
Prepaid items include homeowners insurance, property taxes, and prepaid interest. These are paid in advance and held in your escrow account. Make sure the amounts are reasonable and match the quotes you received.
Section F: Initial Escrow Payment at Closing
Your lender may require you to fund your escrow account with several months of property taxes and insurance premiums at closing. This ensures there is enough money in the account to pay those bills when they come due. The number of months collected should match your lender's policy.
Section G: Other Costs
This section includes any other costs not covered elsewhere, such as the real estate commission (on the seller's side) or HOA transfer fees.
Page 3: Calculating Cash to Close
Page 3 shows how much cash you need to bring to closing. It starts with the purchase price, subtracts your loan amount and earnest money deposit, and adds your total closing costs and any other adjustments. The result is the exact amount you need to pay at closing.
What to check: Compare the "Cash to Close" amount on page 3 to your Loan Estimate. If it is significantly different, ask why. Also verify that your earnest money deposit is properly credited.
Page 4: Additional Information
Page 4 contains additional disclosures, including:
- Alternate APR: The APR shown with and without mortgage insurance
- Total Interest Percentage: The total amount of interest you will pay over the life of the loan
- Appraisal information: Whether you received a copy of the appraisal
- Contract details: A summary of the sale contract
- Lender contact information: Who to contact with questions
Page 5: Loan Disclosures
The final page includes important legal disclosures about your loan, including:
- Whether you have a right of rescission (typically only for refinances, not purchases)
- What happens if you miss a payment
- Your liability for the loan
- The lender's rights in case of default
Comparing Your Closing Disclosure to Your Loan Estimate
One of the most important steps is comparing your Closing Disclosure to the Loan Estimate you received earlier. The CFPB allows certain fees to increase within tolerance limits, while others must remain the same:
- Zero tolerance: Fees that cannot increase at all: origination charges, the interest rate, and points paid to the lender
- 10% tolerance: Fees that can increase by up to 10% in total: third-party services where you cannot shop, recording fees, and government charges
- No tolerance: Fees that can change by any amount: third-party services where you can shop, homeowners insurance, and prepaid items
If any zero-tolerance fee has increased, or if the total of the 10% tolerance fees exceeds the limit, you have the right to ask for a correction or an explanation before closing.
Common Errors to Look For on Your Closing Disclosure
- Wrong loan amount or interest rate: Verify the numbers match your final approval letter
- Incorrect monthly payment: Check the calculation, especially if escrow amounts are included
- Missing or duplicate fees: Look for fees that were not on your Loan Estimate or appear twice
- Wrong escrow amounts: Verify the number of months being collected matches your lender's requirements
- Incorrect property taxes: Make sure the tax amount matches the current tax bill
- Wrong spelling of your name: This can cause issues with the deed and title insurance
Frequently Asked Questions About the Closing Disclosure
When do I receive the Closing Disclosure?
Your lender must provide the Closing Disclosure at least three business days before your closing date. If you have not received it by then, contact your lender immediately. The three-day rule is a legal requirement, not a suggestion.
What should I do if I find an error on the Closing Disclosure?
Contact your lender immediately. If the error involves a zero-tolerance fee, the lender must correct it and provide a new CD, which may reset the three-day review period. If the error is minor, you may still be able to close on time, but make sure the issue is documented.
Can I close if I have not received my Closing Disclosure?
No. Closing without receiving the CD three business days in advance is a violation of federal law. Do not proceed with closing until you have received and reviewed the document.
Is the Closing Disclosure the same as the HUD-1?
The Closing Disclosure replaced the HUD-1 Settlement Statement in 2015 for most mortgage transactions. The CD is designed to be clearer and easier to understand than the old HUD-1. However, some cash transactions and reverse mortgages may still use the HUD-1.
Need Help Reviewing Your Closing Disclosure?
I have helped hundreds of buyers review their closing documents and catch errors before they signed. Let me help you too.
Bob Millaway
Redfin Senior Agent · AI Certified Agent · 636+ homes sold across Burlington County and South Jersey. Licensed NJ Salesperson #791082.