What does "Closing Disclosure" mean?

Definition

A Closing Disclosure is a five-page document that provides the final details of your loan. It lists your interest rate, monthly payment, and all closing costs, and you must receive it at least three business days before closing.

Understanding the Closing Disclosure

The Closing Disclosure arrives near the end of the home-buying journey, typically three days before closing. It outlines the final terms and costs of your mortgage. In simple terms, it’s like a receipt for your home loan. Example: If your loan amount is $200,000, the Closing Disclosure will list your monthly payment, interest rate, and total closing costs, such as $3,000. It's not a bill you need to pay at once. Some think it can be changed frequently before closing, but it's a finalized document that reflects agreed-upon terms. This document ensures transparency, helping you understand the financial commitment you're making.

People Want To Know

Does a closing disclosure mean a loan is approved?

A Closing Disclosure does not mean a loan is approved. It is a document that outlines the final terms of your loan and closing costs, but final approval must still be confirmed by the lender. Approval depends on factors like income verification, credit score, and debt-to-income ratio.

Can a mortgage fall through after closing disclosure?

Yes, a mortgage can fall through after the Closing Disclosure if issues arise during the final underwriting process. Common reasons include changes in the borrower's financial situation, such as job loss or significant new debt, or discrepancies in the property appraisal.

Is the closing disclosure the last step?

No, the Closing Disclosure is not the last step. After you receive the Closing Disclosure, you still need to complete the closing process, where you sign final documents and pay any closing costs. This typically occurs within a few days after receiving the Closing Disclosure.

What happens after signing a closing disclosure?

After signing a Closing Disclosure, you will move toward the closing process, which typically occurs within a few days. You will finalize your mortgage agreement, pay any closing costs, and sign the necessary documents to complete the transaction. Once all steps are completed, the lender will fund the loan, and you will officially become the homeowner.

Flip the Script - Master mortgage objections

More From The Mortgage Glossary

Co-borrower

A co-borrower is a person who applies for a mortgage with you. Both of you are legally responsible for repaying the loan, and you typically both have ownership of the home.

Co-signer

A co-signer is a person who signs a loan agreement with you and agrees to be responsible for the debt. While they share the legal obligation to repay the loan, they usually don't have ownership of the property.

Collateral

Collateral is an asset that is pledged to a lender to secure a loan. For a mortgage, the home itself serves as collateral, meaning the lender can seize the property if you fail to make payments.