Your Closing Disclosure and the Three-Day Rule

Clear to close means the underwriter has signed off on your conditions and the lender is ready to prepare your final loan documents. Next comes your Closing Disclosure, the five-page form that shows your final loan terms and costs. Federal rules give you time to read it before you sign. Here is how that works and what to check.

You must receive your Closing Disclosure at least three business days before you become legally bound on the loan, which the rule calls consummation; in California, that is usually when you sign your loan documents. For this rule, business days are every day except Sundays and federal public holidays, so Saturdays count. If the disclosure is not handed to you in person, whether it is mailed or emailed, you are generally treated as having received it three business days after it was sent, unless there is proof you received it sooner. That is why many lenders email it and ask you to confirm receipt. Ask your loan officer or escrow officer when your disclosure will go out, so you can plan your signing.

Changes are common in the last days before closing, and most of them simply mean you receive a corrected Closing Disclosure at or before signing. Three kinds of change give you a new three-business-day waiting period: the APR shown becomes inaccurate beyond the allowed tolerance (for most loans, more than one-eighth of a percentage point; some decreases do not count), the loan product changes, for example from a fixed rate to an adjustable rate, or a prepayment penalty is added. A new waiting period can move your signing date, so if a late change is coming, ask your loan officer whether it restarts the clock.

Lay your most recent Loan Estimate next to your Closing Disclosure. On page 1, check that the loan amount, loan term, product, loan type, interest rate, and monthly principal and interest match what you expect, and that any prepayment penalty or balloon payment is what you agreed to. On page 2, compare the lettered sections of closing costs. Page 3 has a Calculating Cash to Close table that shows the Loan Estimate figure next to the final figure for each line, and says whether each one changed. Pages 4 and 5 cover loan features, such as your escrow account, and the loan calculations, including the total of payments, the APR, and the Total Interest Percentage. Ask about anything that moved and you do not understand.

Make sure your name is spelled correctly and the property address is right. Check that your deposit and any seller credits or lender credits appear where they should. Confirm the cash to close, and remember that the final amount to send comes from your escrow officer. Look at the escrow account section on page 4, which shows what your lender plans to collect for property taxes and insurance each month. In California, a supplemental property tax bill often arrives after you buy, and it may not be paid from that account, so ask your lender how it will be handled.

• ✓You must receive your Closing Disclosure at least three business days before you sign, and Saturdays count
• ✓An APR that becomes inaccurate beyond the tolerance, a new loan product, or an added prepayment penalty restarts the three days
• ✓Use the Calculating Cash to Close table on page 3 to see what changed from your Loan Estimate
• ✓Other changes usually just mean a corrected disclosure, not a new waiting period
• ✓Call your loan officer right away about anything that looks wrong; the three days are there to fix it