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Reading Loan Estimates and Closing Disclosures

For the purpose of transparency, the Consumer Finance Protection Bureau (CFPB) requires lenders to provide two forms to show the fees and credits on your loan. These forms are the Loan Estimate (LE) and Closing Disclosure (CD).

Within three days of loan registration, you’ll receive a Loan Estimate, which shows rounded, estimated costs.

At least three days before signing, you’ll receive a Closing Disclosure (CD). This form has a similar layout to the LE, but goes more in-depth. Fees on your CD may still be estimated, but should be mostly final.

Where do these fees and credits come from? And which ones can you control? While each loan may have different costs associated with them, the forms are standardized to help you understand these questions.

Loan Estimate Breakdown

Loan Terms

Loan Amount: This will match what you have discussed with your advisor. Based on your scenario there may be a maximum you can take out.

Interest Rate: This will match what you have discussed with your advisor. If you have not locked yet, it may still change.

Projected Payments

Mortgage Insurance: If mortgage insurance is required, the amount will be here. The cost for mortgage insurance comes from the lender, or a vendor they work with.

Estimated Escrow: If you decide to impound your loan the total, monthly escrow amount will be here, but will be estimated until tax bill and insurance amounts have been set.

Estimated Taxes, Insurance, & Assessments: Whether your loan is escrowed or not, the monthly amount for your taxes and insurance will be here. Other fees, likeHOA dues, will also be in this section.

Costs At Closing

Estimated Closing Costs: This is the total of the costs on Page 2 minus any lender credits.

Estimated Cash to Close: This is the difference between all costs, credits and the loan amount. If positive, it’s the amount you need to bring in. If negative, it’s the amount you will receive.

Loan Costs

These are the costs of the loan process. Each section helps understand where fees come from.

Section A: Origination Charges

These are upfront charges from the lender. If you’re buying points the amount will be reflected here as well as any fees to the lender for underwriting, processing, etc.

Section B: Services You Can Not Shop For

These are services that you do not have control over. These fees are usually from a vendor your lender or broker works with. Different lenders may have different amounts in this section.

Section C: Service You Can Shop For

These are any fees you may have control over.

In refinances you can shop around for a title and/or escrow company and use them upon lender approval. Generally, brokers and lenders have companies they regularly work with and recommend.

In purchases, the seller chooses the title/escrow company, so you as the buyer are not able to shop for these fees. Therefore, these fees will be the same regardless of what lender you choose, and are usually moved to Section B on your CD.

Section D:

Total of sections A, B and C

Other Costs

These are other items you need to pay for such as recording fees for your new deeds and any tax or insurance bills due.

Section E: Taxes and other Government Fees

THe cost to record your loan, along with any other required government fees. These charges are usually determined by the property’s county.

Section F: Prepaids

These are any costs you pay in advance.

Even if your loan is not impounded/escrowed you may need to pay a homeowner insurance renewal bill or your latest property tax bill based on your loan’s funding date and your bills’ due date.

Prepaid interest is also collected in this section and is calculated based funding date

Section G: Initial Escrow Payment At Closing

These are funds needed to set up your new escrow account at closing.

If your account is not impounded/escrowed then there will be no amounts listed.

If your account is impounded/escrowed the lender is allowed to collect an additional two months.

If you’re refinancing and your previous loan was escrowed, you will receive the remainder of your previous amount after the transaction is complete.

Section H: Other

This is for any other fees that do not get collected in the other categories. If your property has an HOA those fees will usually be listed here.

Section I:

Total of sections E, F, G, and H

Section J: Total Closing Costs

This is the total of Section D plus Section I minus any lender credits.

Calculating Cash to Close

This section estimates how much cash to close is still required. This is the difference between all costs, credits, and the loan amount.

This is the difference between all costs, credits and the loan amount. If positive, it’s the amount you need to bring in. If negative, it’s the amount you will receive.

There may be limits on the amount of cashback you can receive depending on loan purpose and current guidelines.

Closing Disclosure Breakdown

The sections on the CD are very similar to the LE but have added columns to better explain the finalized costs.

CDs must be received, at minimum, three days before you sign your loan documents. To get it started sooner, some lenders send an initial CD, which is released before the loan is clear to close. Fees may still be estimated at this point.

Receiving the CD does not mean you agree to the loan terms yet, just that you’ve acknowledged them. This acknowledgement is what starts the three day waiting period. The agreement is not set until you have officially signed in front of a notary.

Column Differences:

Borrower-Paid At Closing: These are fees due from you at closing

Borrower-Paid Before Closing: These are fees already paid by you

Seller-Paid At Closing: These are fees due from the seller at closing. In a refinance transaction the Seller-Paid columns will be blank since there is no seller involved.

Seller-Paid Before Closing: These are fees already paid by the seller

Paid by Others: These are any fees paid by a party other than the Borrower or Seller.

Section B Differences:

If you used your broker’s recommended title company or you had to use the seller’s title company in a purchase, title and escrow fees may have been moved up to Section B.

Section G Differences:

If you are setting up an escrow account, the lender is allowed to collect up to two additional months as a buffer in case your renewal or next tax bill comes in higher.

When these two months are collected up front, there may later be a point where the account has an amount excess. If this happens, you will see an Aggregate Adjustment in this section as a correction.

Calculating Cash to Close Differences:

This section will compare the costs on your LE to the CD.

Summaries of Transactions Section:

This section includes all of the additional adjustments for the transaction like seller or agent credits.

If you have any pro-rations for current tax bills, HOA dues or other bills they will be here.

Items in “Adjustments for Items Paid by Seller in Advance'' are collected from the buyer and credited to the seller.

Items in“Adjustment for Items Unpaid by Seller”are collected from the seller and credited to the buyer.

Additional Resources:

The Consumer Finance Protection Bureau has created an interactive version of these forms so you can see, page by page, what they look like.

Learn more with CFPB Interactive LE ›
Learn more with CFPB Interactive CD ›

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