What Are a Loan Estimate (LE) and Closing Disclosure (CD)?

What Are a Loan Estimate (LE) and Closing Disclosure (CD)?
Clint Edwards
Post Date: Updated:

Your lender has certain responsibilities to you, including providing you with a loan estimate and a closing disclosure. Find out what the loan estimate and closing disclosure should include, and when they must be supplied to you by law.

There are two very important documents that bookend the home loan process. These are required by law, and are designed to protect the homebuyer by providing them with clear, transparent information about the costs of their home loan.The first is the loan estimate, and the second is the loan disclosure.

The Loan Estimate

A loan estimate (LE) is a three-page form that lists  important information about the mortgage loan you’re considering.Your lender will provide it to you within three days after they receive your following basic loan information:

  • Name
  • Income
  • Social Security Number
  • Address of the property you’re considering
  • Value of the property you’re considering
  • Loan amount requested

The LE will provide you with the estimated costs for the loan you’ve applied for:

  • Loan amount
  • Interest rate
  • Monthly payment
  • Closing costs
  • Taxes and other costs

The Loan Estimate will indicate whether your have chosen to lock your rate or not. If the LE indicates your rate is not locked the rate and terms of your loan can change. If your rate is locked the lender is required to honor the terms of the loan within certain tolerances on the closing costs. The only exceptions are if there is a valid change of circumstance meaning the parameters of your loan changed such as a lower appraised value, lock extension, etc. If your interest rate or loan details change, you may receive a revised LE.

Closing Disclosure

A closing disclosure (CD) is a five-page form that gives you the final details and costs associated with your mortgage loan. Your lender will send it to you at least three business days before you’re scheduled to close.

The CD is essentially the final Loan Estimate. Again the rate and costs have to match your LE and be within the governments allowed tolerances. This form provides you with the final costs of the loan you’ve selected:

  • Loan amount
  • Interest rate
  • Monthly payment
  • Closing costs
  • Estimated taxes, insurance and other costs
  • Summaries of transactions

Compare your LE and CD

You’ll want to compare these two documents to look for any significant discrepancies, particularly in regard to fees and charges. If you find an error, contact your lender or settlement agent to have it corrected immediately.

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