Closing Disclosure: the 3-business-day rule and what to check

What the form is

The CFPB says the Closing Disclosure shows “how much you will pay in fees and other costs to get your mortgage.” It lists the loan terms, including whether the loan has a prepayment penalty, balloon payment or demand feature; the monthly payment; closing costs including lender charges, government fees, prepaid items and lender credits; cash to close; seller credits; and summary figures such as the Total of Payments, Finance Charge, APR and Total Interest Percentage. For a line-by-line reading, see closing costs explained.

The form comes after the Loan Estimate, which is the early version. Together they let you check that the final deal matches the quote.

The three-business-day rule

Regulation Z, 12 CFR 1026.19(f)(1)(ii)(A), says the creditor “shall ensure that the consumer receives” the Closing Disclosure no later than three business days before consummation. Consummation means closing the loan. Timeshare transactions are excepted.

“Business day” has two meanings in Regulation Z. For this deadline, 12 CFR 1026.2(a)(6) uses the precise definition: all calendar days except Sundays and the legal public holidays listed in 5 U.S.C. 6103(a), such as New Year’s Day, Independence Day, Thanksgiving Day and Christmas Day. Saturdays count; Sundays and federal holidays do not. A weekend or holiday can therefore push your earliest closing date later than three calendar days away. Ask your lender to name the earliest closing date.

The CFPB says to “use these days wisely”: the window lets you compare final terms to the estimates and ask questions before closing. The CFPB also suggests asking your lender or closing agent at least a week ahead how you will get the form (email, mail or download).

What changes restart the three days

If one of three things becomes inaccurate before closing, the creditor must give you corrected disclosures, and the three-day wait applies again (12 CFR 1026.19(f)(2)(ii)):

Other changes do not restart the clock. They are corrected on a revised form, and you still have a right to review it. If an event within 30 days after closing makes the disclosure inaccurate and changes an amount you actually paid, corrected disclosures are due within 30 days of the lender learning of the event (12 CFR 1026.19(f)(2)(iii)).

What to compare with your Loan Estimate

The CFPB says to check these items against your most recent Loan Estimate:

• Loan term, purpose, product and type: “It’s very important these items match what you were expecting.”
• Loan amount, interest rate and estimated total monthly payment.
• Closing costs and cash to close. “Check that your Cash to Close matches your most recent Loan Estimate.”
• Services you did not shop for, which should be similar to Loan Estimate sections B and C, and services you did shop for, priced as you agreed.
• The seller credit, which should match your agreement with the seller.
• The APR on both documents. A higher APR on the Closing Disclosure suggests costs have increased.

If anything differs, ask the lender why. The CFPB also advises asking for the Promissory Note, the Mortgage and the Deed in advance, and not signing anything at closing until you have double-checked.

Which costs can change after the Loan Estimate

Regulation Z limits cost increases (12 CFR 1026.19(e)(3); CFPB):

Example with assumed numbers: if recording fees and listed-provider charges total $500 on the Loan Estimate, that group may reach $550 on the Closing Disclosure without a change in circumstances. If costs exceed the limits and no change in circumstances occurred, “you are entitled to a refund of the amount above the allowable limits” (CFPB). Examples of changed circumstances include a different loan type, a new down payment, or a higher or lower appraisal.

Where states differ

The three-day rule is federal. States decide who customarily pays each cost, what the transfer taxes and recording fees are, and who conducts the closing. See closing costs by state, transfer tax by state and whether an attorney is required. Watch for wire fraud: the CFPB warns that scammers may pose as your agent and ask for changed wiring instructions, so verify any change before sending funds. See also what happens at closing.