What is a Closing Disclosure in Real Estate?

A Closing Disclosure (CD) is a five-page document that provides the borrower with the final details of their mortgage loan, including the loan terms, projected monthly payments, closing costs, and the cash required to close. Required by the TILA-RESPA Integrated Disclosure (TRID) rule — also known as the "Know Before You Owe" rule — the Closing Disclosure must be delivered to the borrower at least three business days before the closing date. This three-day review period gives the borrower time to compare the final terms with the earlier Loan Estimate (LE) they received within three business days of applying for the loan.

The Closing Disclosure replaces the former HUD-1 Settlement Statement and the Truth in Lending Disclosure that were used before October 2015. If certain key terms change after the CD is provided, a new three-day waiting period is required. These triggering changes include: the APR increases by more than 1/8% for fixed-rate loans or 1/4% for adjustable-rate loans, a prepayment penalty is added, or the loan product changes.

The CD itemizes all fees and costs, separated into sections: loan costs (origination charges, services the borrower cannot shop for, and services the borrower can shop for), other costs (taxes, prepaids, initial escrow deposit), and summaries of the borrower's and seller's transactions. TRID applies to most closed-end consumer credit transactions secured by real estate, but does not apply to HELOCs, reverse mortgages, or loans secured by mobile homes not attached to real property.