Loan Estimate & Closing Disclosure
These are the two federally required documents that show what your loan will cost. The Loan Estimate (LE) comes at the start and is an estimate. The Closing Disclosure (CD) comes at the end and is the final figures. They are laid out to be compared side by side.
The difference between the two
| Loan Estimate (LE) | Closing Disclosure (CD) | |
|---|---|---|
| What it is | The lender's good-faith estimate of your loan terms and costs | The final, actual terms and costs of your loan |
| When you get it | Within 3 business days of applying | At least 3 business days before closing |
| Length | 3 pages | 5 pages |
| What it's for | Understanding the offer and comparing lenders | Checking the final numbers before you sign |
| Who prepares it | Your lender or mortgage broker | Your lender, usually together with the title company or closing attorney |
| Can it change? | Yes. A revised LE is issued when something legitimately changes | Rarely, and only a few changes delay closing |
The Loan Estimate: when you get it
- The trigger is an application. Under federal rules you've applied once the lender has six things: your name, your income, your Social Security number (to pull credit), the property address, an estimate of the property's value, and the loan amount you want. A pre-qualification or pre-approval without a property address does not require a Loan Estimate.
- The deadline is 3 business days. The lender must deliver it, or put it in the mail, no later than the third business day after receiving your application.
- Your other loan disclosures arrive with it. The Loan Estimate comes as part of an initial disclosure package, also due within 3 business days of your application. It typically includes the list of service providers you are allowed to shop for, your right to a copy of the appraisal, and the lender's notices about your application. Review and sign these as soon as they arrive, because the lender cannot move your file forward until you do. Signing them confirms you received them. It does not commit you to the loan.
- No fees before then. Until you've received the Loan Estimate and told the lender you want to proceed, the only fee a lender may charge is a reasonable fee for your credit report. That means no appraisal or application fee before that point.
- It's good for 10 business days. If you don't tell the lender you intend to proceed within 10 business days, the lender is no longer bound by those figures and may issue a new estimate.
- You may get more than one. A revised Loan Estimate is normal when you lock your rate, the loan amount or program changes, or the appraisal comes in different from expected. Any revised LE has to reach you at least 4 business days before closing.
The Closing Disclosure: when you get it
- At least 3 business days before closing. You must receive it by then, not just be sent it. If it's mailed, the law treats it as received 3 business days after mailing, which is why most lenders send it electronically.
- How the days are counted. For the Closing Disclosure, every day counts except Sundays and federal holidays. Receive it on a Monday and the earliest you can close is Thursday.
- Only three changes restart the clock: your APR changes by more than a small allowed amount, the loan product changes (for example, fixed to adjustable), or a prepayment penalty is added. Other changes, such as a corrected fee or a seller credit, get you a corrected CD without delaying closing.
- The wait can't be skipped for convenience. It can only be waived for a genuine personal financial emergency, in a written statement from you. That is rare.
When you sign, and what signing means
- Signing the Loan Estimate does not commit you to the loan. If you're asked to sign it, your signature only confirms you received it. You can still walk away or choose another lender.
- "Intent to proceed" is the step that moves things forward. After you've received the LE, you tell the lender you want to go ahead, by signing a form, replying by email, or saying so by phone, depending on the lender. Only then can the lender order the appraisal and charge fees. It still doesn't obligate you to close.
- Acknowledge the Closing Disclosure the day it arrives. Most lenders send it electronically and ask you to sign or click to confirm receipt. That confirmation is what starts your 3-day clock, so a delay in acknowledging it can push back your closing. With more than one borrower, each of you typically needs to acknowledge it.
- Acknowledging the CD is not agreeing to it. You're confirming you received it. If something looks wrong, say so right away. You still have the full three days to ask questions.
- You sign the final Closing Disclosure at the closing table, along with the note and the rest of your loan documents. That is when you're committed.
What to check when the Closing Disclosure arrives
Put it next to your most recent Loan Estimate. The pages are designed to line up.
- Loan terms: loan amount, interest rate, and monthly principal and interest should match what you locked.
- Loan type and features: fixed or adjustable, and "No" beside prepayment penalty and balloon payment unless you agreed to one.
- Projected payments: the full monthly payment, including mortgage insurance and escrow for taxes and insurance.
- Closing costs: compare each section with the Loan Estimate. Page 3 of the CD has a table showing the estimate and the final figure side by side, and whether each changed.
- Cash to close: the amount you'll bring, with your earnest money and any seller credits already subtracted.
- The basics: the spelling of your name, the property address, and the closing date.
How much the numbers can change between the two
Federal rules limit how much each cost on your Loan Estimate can rise by the time it appears on your Closing Disclosure:
- Cannot increase: fees paid to your lender or mortgage broker, fees for services you weren't allowed to shop for, and transfer taxes.
- Can increase up to 10% in total: recording fees, and third-party services where you picked a provider from your lender's written list.
- Can change without limit: prepaid interest, homeowners insurance premiums, escrow deposits, and services where you chose your own provider off the list.
A lender can reissue the estimate when something genuinely changes, such as a new loan amount, a rate lock, or a lower appraisal.
Paste or upload your Loan Estimate or Closing Disclosure into LoanLucid's Document Explainer for a plain-English breakdown of every line.
Cash to close: what you'll actually pay
Your down payment is only part of the money you bring to closing. "Cash to close" is the full amount: down payment, plus closing costs, plus prepaid items, minus anything you've already paid or been credited.
Closing costs, line by line
The Consumer Financial Protection Bureau (CFPB) says closing costs typically range from 2% to 5% of the purchase price, not counting your down payment. They fall into four groups:
- Lender fees: origination, underwriting and processing fees, plus any discount points you choose to pay to lower your rate.
- Third-party fees: appraisal, credit report, flood certification, title search, lender's title insurance, the closing or attorney fee, survey (where required), and recording fees.
- Government charges: transfer taxes, intangible or mortgage taxes, and recording fees. These vary widely by state and county.
- Prepaids and escrow setup: your first year of homeowners insurance, daily interest from closing day to the end of that month, and the starting deposit for your escrow account (usually a few months of taxes and insurance).
Prepaids and escrow deposits are not fees. They're your own taxes, insurance and interest paid in advance, and they're often the largest part of the total.
Earnest money
Earnest money is the good-faith deposit you pay when your offer is accepted. It's held in escrow and credited toward your cash to close. There is no federal rule on the amount. It is set by local custom and negotiation, commonly around 1% to 3% of the price. Whether you get it back if the deal falls apart depends on your contract's contingencies and deadlines, so know those dates.
Who can help pay: seller credits
A seller can agree to pay part of your closing costs, but each loan program caps how much:
| Loan type | Maximum seller contribution |
|---|---|
| Conventional, primary or second home | 3% with less than 10% down; 6% with 10% to under 25% down; 9% with 25% or more down |
| Conventional, investment property | 2% |
| FHA | 6% of the sales price |
| VA | Normal closing costs are not capped; "seller concessions" (such as paying your funding fee or paying off your debts) are capped at 4% of the home's value |
| USDA | 6% of the sales price |
Seller credits can only cover real costs. If the credit is larger than your closing costs and prepaids, the extra can't be handed to you as cash.
Where your money can come from
Lenders must document the source of every dollar you bring. For a purchase, expect to provide your two most recent months of statements for each account you're using.
- Your own savings and checking: the simplest source. Money that has sat in your account for the full statement period is considered "seasoned".
- Large deposits: on conventional loans, any single deposit larger than 50% of your total monthly qualifying income has to be explained and documented if you need that money to close. FHA applies a similar test. Payroll deposits don't count as large deposits.
- Gift funds: allowed on primary residences and second homes, never on investment properties. See below.
- Retirement accounts: you can withdraw from, or borrow against, a 401(k). A loan secured by your own 401(k) is an acceptable source of funds, and its repayment is generally not counted in your debt-to-income ratio.
- Sale of an asset: selling a car or other property is fine if you can document ownership, the value, and the buyer's payment.
- Cash kept at home: not accepted on standard conventional loans. FHA can allow it with a written explanation of how it was saved, and Fannie Mae's HomeReady program allows it in limited cases. Deposit it early and talk to your loan officer first.
Gift funds
- Conventional: the gift must come from a relative, fiancé(e), domestic partner, or (since February 2026) someone with a long-standing family-like or mentorship relationship with you. It can't come from anyone with a stake in the sale, such as the seller, builder or real estate agent.
- FHA: family members, your employer or labor union, a close friend with a clearly documented interest in you, a charity, or a government homebuyer program.
- How much: on a one-unit primary residence your entire down payment can be a gift. On a conventional loan for a 2-4 unit primary residence or a second home with less than 20% down, at least 5% must be your own money.
- The gift letter: signed by the donor, stating the amount, their name, address, phone number and relationship to you, and that no repayment is expected. Your lender will also document the transfer of the money.
Reserves
Reserves are funds left over after closing, measured in months of your full housing payment. Conventional minimums are two months for a second home and six months for an investment property or a 2-4 unit primary residence. For a one-unit primary residence there's no fixed minimum, although the automated underwriting system may still ask for some. FHA requires three months on 3-4 unit properties.
Once you've applied, avoid shifting money between accounts or making cash deposits. Every unexplained deposit becomes a document request. If you must move money, keep the paper trail for both accounts.
After closing: escrow, taxes & your servicer
Your principal and interest stay the same on a fixed-rate loan. Your total monthly payment can still change, because taxes and insurance change.
How an escrow account works
Each month, part of your payment goes into an escrow account. Your loan servicer uses it to pay your property taxes and homeowners insurance when they come due.
- The cushion: federal rules let the servicer keep a cushion of up to one-sixth of your yearly escrow bills, which is two months' worth.
- The annual review: once a year the servicer analyzes the account and sends you a statement.
- Surplus: if there's $50 or more extra and you're current on your payments, it must be refunded within 30 days.
- Shortage: if taxes or insurance went up, your payment rises. A shortage of one month's escrow payment or more must be spread over at least 12 months; the servicer can't demand it in a lump sum. You may choose to pay it off at once to keep the increase smaller.
Can you skip escrow?
FHA loans require escrow, and USDA requires it of lenders able to offer it. VA doesn't require it, though most VA lenders do. On conventional loans, many lenders will waive escrow when you put 20% or more down, sometimes for a fee or a slightly higher rate. Without escrow you pay the tax and insurance bills yourself, in full, when they're due.
Why your payment often rises in year two
In many areas, a home is reassessed after it sells. Your first escrow payment is usually based on the seller's tax bill, which may reflect an old, lower value or exemptions you don't qualify for. When the new bill arrives, the escrow review catches up, and it adds a shortage on top. This is the most common payment surprise for new owners, and it hits new construction hardest, where the first tax bill may cover land only.
Homestead exemptions
Most states reduce property taxes on a home you live in, but you usually have to apply, and there's a deadline. Rules are set by each state and county. Two examples:
- Florida: a homestead exemption of up to $50,000, with the second half adjusted yearly for inflation (so slightly more in 2026). You must own and live in the home on January 1 and apply by March 1. "Save Our Homes" then caps yearly increases in assessed value at 3% or inflation, whichever is lower. After a sale, the home is reassessed at full market value the following January 1. A November 2026 ballot measure could change the exemption from 2027.
- Georgia: homes are assessed at 40% of fair market value. The standard state exemption takes $2,000 off that assessed value, and many counties and cities offer larger ones. You must own and occupy the home on January 1 and apply by April 1. Since 2025, a statewide exemption also limits how fast a homesteaded property's assessed value can rise, except where a county, city or school district opted out.
Check your own county tax office for the exemptions and deadlines that apply to you, and file the first year you're eligible.
When your loan is sold or transferred
It's normal for the company that collects your payment to change. Your loan's terms do not change when this happens.
- Your current servicer must notify you at least 15 days before the transfer, and the new servicer within 15 days after it.
- For 60 days after the transfer, a payment you sent on time to the old servicer can't be treated as late.
- Be wary of any letter or call asking you to send payments somewhere new. Confirm it with your current servicer using the phone number on a statement you already have.
Rules and figures on this page were checked in October 2026 against the CFPB, Regulations X and Z, the Fannie Mae Selling Guide, va.gov, USDA, and state revenue departments. FHA figures should be confirmed against HUD Handbook 4000.1. Lending rules change and lenders add their own requirements, so confirm anything important with your loan officer.
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