Closing disclosure explainer | Consumer Financial Protection Bureau (2024)

FAQs

What is the CFPB 3 day rule for closing disclosure? ›

Pre-consummation or account opening waiting period.

A creditor must furnish § 1026.32 disclosures at least three business days prior to consummation for a closed-end, high-cost mortgage and at least three business days prior to account opening for an open-end, high-cost mortgage.

Despite receiving the Closing Disclosure, loan approval is not guaranteed, and unforeseen circ*mstances can lead to denial, such as changes in financial status or property issues discovered during underwriting.

It's important to compare your Closing Disclosure with your initial Loan Estimate to identify any discrepancies. If you notice any differences, including an increase in the mortgage interest rate or borrowing costs, you need to talk to your lender before you sign.

What should I do if I do not get a Closing Disclosure three days before my mortgage closing? If you have not received this document, you should request one from your lender immediately. You should also not go through with the closing until you receive and review the Closing Disclosure.

This gives you time to review the terms of the deal before you get to the closing table. Many things can change in the days leading up to closing. Most changes will not require your lender to give you three more business days to review the new terms before closing.

One Spouse's Income Doesn't Meet Requirements

Many lenders use the 2/2/2 rule to evaluate loan eligibility, which typically requires: 2 years of W-2s. 2 years of tax returns. 2 months of bank statements.

The traditional rule of thumb is that no more than 28% of your monthly gross income or 25% of your net income should go to your mortgage payment.

The three items are: 1) the APR becomes inaccurate (violates tolerances); 2) the addition of prepayment penalty; and, 3) a loan product change. These three items require redisclosure and a new waiting period of three business days prior to the loan closing.

Signing the Closing Disclosure does not automatically mean your loan is approved. It is possible for your lender to find a last-minute red flag and back out of the contract. In other words, getting denied after the Closing Disclosure is issued is possible.

You can correct errors on the closing disclosure before the closing, but the loan amount and interest rate can't change unless there's a change in circ*mstances.

Does a closing disclosure mean clear to close? ›

Clear to close means you're ready for the closing process, while closing refers to the act of closing on your mortgage loan. After you've been cleared to close you'll need to sign your closing disclosure, do a final walkthrough and attend your closing.

There are a few more steps and actions to take before final approval, like an appraisal and inspection. How long does it take from clear to close to actual closing? It typically takes three days between the time you receive your closing disclosure and the day you close.

Your Closing Disclosure is the last thing that stands between you and finalizing your mortgage. It may feel like a mere formality to quickly sign before moving into your new home, but the information in the Closing Disclosure must be flawless.

Thus, disclosures must be delivered three days before closing, and not 72 hours prior to closing. Note: If a federal holiday falls in the three-day period, add a day for disclosure delivery.

Section 1002.14(a)(1) requires that the creditor “provide” copies of appraisals and other written valuations to the applicant “promptly upon completion,” or no later than three business days before consummation (for closed-end credit) or account opening (for open-end credit), whichever is earlier.

A consumer may modify or waive the right to the three-day waiting period only after receiving the disclosures required by § 1026.32 and only if the circ*mstances meet the criteria for establishing a bona fide personal financial emergency under § 1026.23(e).

Regulation Z provides consumers with a three business day period from consummation to rescind non-purchase credit transactions (such as refinances, second mortgages and HELOCs) secured by the member's principal dwelling.

When you apply for a mortgage loan, the lender is required to provide you with initial disclosures within three business days of application. Initial disclosures let you know what you can expect in terms of cost, monthly payments, and loan structure.