When you apply for a mortgage, you’ll receive a Loan Estimate. As the name suggests, it’s an estimate of how much the loan will cost you. Lenders must send you this document within three days after you apply for the loan.
Once you get through the underwriting process and are ready to close on your loan, lenders must then send you a Closing Disclosure. This document also has a three-day rule. Only, this time, you must receive the document at least three days before you close on the loan.
What’s on the Closing Disclosure?
Like the Loan Estimate, the Closing Disclosure shows details for all of the closing costs for the loan. It also includes the locked-in interest rate and your loan payment for the term of the loan.
Because you receive the document three days before the closing, take the time to review it. This is your time to ask questions about it and request any changes if you find something wrong. It’s important to compare your Closing Disclosure with the previously received Loan Estimate. Look for any discrepancies or information that changed that the lender didn’t’ tell you about.
On Page 3 of the Closing Disclosure, you’ll see the complete breakdown of the closing costs. At the top of the page, it will also show you what the costs were on the Loan Estimate, what they are on the Closing Disclosure, and whether or not it changed, with a reason.
In the middle of Page 3, you’ll see the summary of the transaction and at the very bottom, you’ll see your bottom line, or how much you owe at the closing.
Can Changes to the Closing Disclosure Cause a Delay in Closing?
You may worry that if you request changes on the Closing Disclosure that you’ll have to wait the three days to close again. Fortunately, that’s not the case unless you change anything with the loan’s terms. Any of the following reset the three-day clock:
- An increase in the APR of 1/8th or more on fixed loans or 1/4th or more for ARM loans
- The lender adds a prepayment penalty
- The mortgage term or type of loan changes
Any other changes that you make including corrections to a closing cost, changes to the escrow account, or payments to your taxes won’t start the clock again. It’s basically anything that has to do with the loan itself. You are required to have the three days to make sure you understand the implications of the terms.
When Does the Three-Day Period Start?
The three-day waiting period starts after receive the Closing Disclosure. Sundays don’t count in the days, though and your first day is the day after you receive the disclosure. If you receive the disclosure on a Friday, you can’t close until Wednesday.
Can you Waive the Three Day Closing Disclosure Period?
Typically, you can’t waive the three-day closing disclosure rule. As we stated above, the days are there to make sure you understand the loan. it gives you time to back out before you sign on the dotted line and the loan becomes yours. If you feel rushed or make a haste decision, you put yourself at risk of carrying a mortgage you don’t want or can’t afford.
The Importance of Looking Over Your Closing Disclosure
Make sure to review your Closing Disclosure carefully before signing it. Once you give the lender the ‘green light,’ they will prepare your closing documents. When you attend the closing, the documents will reflect everything that you saw in the Closing Disclosure. If you notice a mistake, let the lender know right away. This can prevent delays in your closing as you’d have to have all new documents drawn up if you find the mistake after the fact.
The 3-Day Closing Disclosure rule is in place to protect you. Even though it seems like just another way to delay your closing, it gives you time to think. Rather than closing on a loan that you may or may not want, you now have time to digest the information, ask questions, and make an informed decision.