When you apply for a mortgage loan, your lender has three business days to provide you with yourloan estimate—a detailed summary of the loan terms, fees associated with taking out a mortgage, the loan amount, interest rate, and monthly payments—including estimates for property taxes, homeowner’s insurance, and mortgage insurance, if applicable.
The reason it’s called a loan estimate is that between the time you applied for your loan and when you close escrow on your new home, the data the lender has can change as it goes through the underwriting process which may cause theclosing disclosureto show higher costs or a higher interest rate than you may be expecting.
According toRocketmortgage.com, you should receive your closing disclosure three days before the closing date. This is a final accounting of all your closing costs. Compare the numbers line by line with the loan estimate and if you find a discrepancy, contact your lender for the reason why.
Sometimes, the closing disclosure will be lower than the loan estimate when a lender overestimates some items, but typically, they’re more. Some costs aren’t allowed tochange, including loan origination fees, fees paid to the lender’s third-party service providers, and transfer taxes, which are typically paid by the seller. Costs that can change include prepaid interest between closing and the end of the month. Last, there are costs that have limits on how much they can change, including mortgage recording fees and some third-party services.
FAQs
The reason it's called a loan estimate is that between the time you applied for your loan and when you close escrow on your new home, the data the lender has can change as it goes through the underwriting process which may cause the closing disclosure to show higher costs or a higher interest rate than you may be ...
Does the loan estimate have to match the closing disclosure? ›
The biggest difference between your loan estimate and Closing Disclosure is that the charges on your Closing Disclosure are finalized. But keep in mind that there are limits to the fees and charges that can and can't change between your loan estimate and your final Closing Disclosure.
What happens if the closing disclosure is incorrect? ›
Unfortunately, errors may occur on the Closing Disclosure form — that's why you need to review it. If you do find an error, your lender should provide a new Closing Disclosure form that would restart the three-day period. This could delay your closing date.
Should the closing disclosure be accurate? ›
You'll want to compare the Closing Disclosure side by side with your Loan Estimate. Most of the numbers and terms should be similar, but they may differ because of the time that's passed between the Loan Estimate and the final costs reported on the Closing Disclosure.
Should you always compare your loan estimate to the closing disclosure True or false? ›
What's important to know about the Closing Disclosure? Compare your Closing Disclosure with your most recent Loan Estimate to ensure the terms and costs are what you expected. You have this 3-day window to thoroughly review your loan information and ask any final questions of your lender.
What can change between loan estimate and closing disclosure? ›
As your closing date may be changed, the amount of interest you will need to pay for your first month of homeownership will depend on how many days are left in the month. Homeowner's insurance: Your homeowner's insurance amount can also change between the Loan Estimate and Closing Disclosure.
What are the red flags on closing disclosures? ›
“Red flags” involving the closing disclosure or settlement statement may include: Names and addresses of property seller and buyer vary from other loan documentation. Seller's mailing address is the same as another party to the transaction. Excessive real estate agent commissions paid.
Who is responsible for the accuracy of the closing disclosure? ›
The lender is primarily responsible for its accuracy and timely delivery to the borrower, while the title agent assists in gathering specific information and may handle both the buyer and seller's side of the disclosure.
Can a loan be denied after closing disclosure? ›
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.
Does closing disclosure mean final approval? ›
No, a closing disclosure does not always mean your loan is approved. You may find incorrect information or something you want to change.
Technically, a loan estimate is only binding on the date it's issued. The lender has to give you the loan, with exactly the terms listed in the loan estimate, if on that day you take steps to accept the loan and lock your rate in.
Can mortgage fall through after closing disclosure? ›
Clear-to-close buyers aren't usually denied after their loan is approved and they've signed the Closing Disclosure. But there are circ*mstances when a lender may decline an applicant at this stage. These rejections are usually caused by drastic changes to your financial situation.
How long after closing disclosure is clear to close? ›
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.
Does the loan estimate need to be accurate? ›
Loan estimates are generally pretty accurate. By law, final loan costs must be within 10% of the amount shown on the LE. Mortgage rates change daily, however, so if you are getting a loan estimate from more than one lender, you'll want to try to get them all on the same day so that you're seeing an accurate comparison.
Can a loan estimate be sent after a closing disclosure? ›
The Loan Estimate and Closing Disclosure are two forms that you'll receive during the home-buying process. The Loan Estimate comes at the beginning, after you apply, while the Closing Disclosure comes at the end before you sign the final paperwork for your mortgage.
Does a lender have to honor a loan estimate? ›
Once issued, the terms of the loan estimate are good for 10 days. As long as there aren't any major changes to your application or financial situation, your lender has to honor the estimate if you begin the process of securing the loan within that time frame.
How accurate are closing cost estimates? ›
You want accurate figures. At Homebuyer and plenty of other lenders, these costs get estimated as close to 100 percent accurate as possible. Remember that numbers are never exact upfront. Don't worry about any estimated fees that your lender doesn't dictate.
