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What’s The Difference: Loan Estimate Versus Closing Disclosure
After the application of a home loan, you will receive two documents, a loan estimate, and closing disclosure. On the surface, these documents are identical but they both serve slightly different purposes.
Here is what you need to know about the differences between these two forms and what each means for you:
Double-Check All Information For Accuracy
When you receive both your loan estimate and closing disclosure, double-check all information to make sure that it is accurate. That means:
- The loan number, term, product, and type
- Your personal information
- The purchasing home address
- Sale price
If any part of the information presented is incorrect, contact your lender to get it corrected as soon as possible. Incorrect information can delay your closing and result in a less-than-favorable mortgage outcome.
A loan estimate is a form that you receive after applying for a mortgage. This document contains all of the costs associated with your loan. This is also known as a good faith estimate (GFE).
You should receive your loan estimate within three business days of receiving your loan application.
Review this document for junk fees or unusually high costs.
Your closing disclosure provides you with the same information as your loan estimate but finalized. The costs have been locked in and it will show the exact amount you will need to pay at closing.
Compare the numbers on your closing disclosure to your loan estimate. Note that the costs may or may not have changed. If they have, ask your lender about them. In some cases, your final closing costs may be lower than the estimated amount. This can be due to credits from the seller or lender, and shopping around for services whose costs you can control, like your home inspection.
If you are applying for a reverse mortgage, you will not receive a closing disclosure.
You Are Not Obligated To Go Through With The Loan
Upon receiving and reviewing your loan estimate and closing disclosure, you are not obligated to go through with the loan with that specific lender. And signing the forms doesn’t mean that you accept the loan–it simply means that you have received them.
If the costs are not what you are expected or too high, you can shop around for another lender. Just remember that this can cause your home’s closing to be delayed.