Refinance guide Loan Estimate vs Closing Disclosure on a refinance

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Loan Estimate vs Closing Disclosure on a Refinance: What Homeowners Need to Know

When you refinance your mortgage, two documents tell you — in different stages — what the loan will cost and what you will pay at closing: the Loan Estimate (LE) and the Closing Disclosure (CD). Both come from federal consumer protection rules designed to make mortgage costs transparent. Understanding the purpose, timing, and mechanics of each document helps you compare offers, avoid surprises, and protect your budget.

What they are and when each makes sense

Loan Estimate (LE)

The Loan Estimate is a standard form your lender must give you within three business days of receiving your refinance application. It summarizes key loan terms (interest rate, monthly payment, loan amount), projected closing costs, prepaid items, and the estimated cash you need to bring to closing. Use LEs to compare multiple lenders and decide whether a refinance makes sense.

Closing Disclosure (CD)

The Closing Disclosure is the final, detailed account of your refinance terms and closing costs. Lenders must provide it at least three business days before you close. The CD replaces the LE as the official cost statement and reflects any changes that occurred during underwriting, rate lock, and closing preparation.

When a refinance makes sense (brief)

  • Lower interest rate that meaningfully reduces payment or interest over the loan life.
  • Shortening the loan term without unaffordable payments.
  • Converting from adjustable to fixed rate.
  • Removing private mortgage insurance (PMI) after reaching sufficient equity.
  • Cash-out refinance to consolidate high-interest debt or fund major expenses (weigh costs carefully).

Benefits and drawbacks

Benefits

  • LE: Quick side-by-side comparisons of lenders’ offers, making it easier to shop for the best rate and fees.
  • CD: Final assurance of the actual costs and three days to review before closing, giving time to spot discrepancies.
  • Overall: Greater transparency and standardization that protect borrowers from unexpected or hidden charges.

Drawbacks

  • Fees on the LE are estimates and can change; moving from LE to CD can reveal higher costs if circumstances change.
  • Complex terminology can confuse borrowers about what’s negotiable.
  • Last-minute changes can force a revised CD and delay closing or trigger additional review periods.

Costs and fees you’ll see (and where)

Both the LE and CD list the same categories of costs, but the LE shows estimates and the CD shows final amounts. Typical fees include:

  • Loan origination or processing fees
  • Appraisal fee
  • Credit report fee
  • Title search, title insurance, and settlement/closing agent fees
  • Recording and transfer fees
  • Prepaid interest and escrow reserves (taxes, homeowner’s insurance)
  • Discount points (optional fees to lower your interest rate)

The LE will display an estimated “cash to close.” The CD will show the exact cash required and itemize every charge so you can verify totals, credits, and any lender-paid items.

Step-by-step refinance process and where LE/CD fit

  • 1. Apply for the refinance: Provide documentation (income, assets, loan payoff). Within three business days, each lender must deliver a Loan Estimate.
  • 2. Shop and compare: Use LEs to compare interest rates, monthly payments, closing costs, and cash-to-close. Ask questions and negotiate lender fees or ask for credits.
  • 3. Lock the rate (optional): When you accept an offer, lock your rate to protect against market movement. Rate locks can affect the final CD.
  • 4. Underwriting and processing: Lender verifies information, orders appraisal and title work. If circumstances change, the lender may issue revised disclosures.
  • 5. Receive Closing Disclosure: At least three business days before closing the loan, you receive the CD. Review it carefully — the three-day window is your last opportunity to review terms.
  • 6. Close the loan: Attend closing, sign documents, and pay the cash-to-close amount shown on the CD.

Common pitfalls to avoid

  • Assuming the LE is final — it’s an estimate. Expect differences but understand what can and cannot change.
  • Not comparing APR and total interest costs — monthly payment alone doesn’t show long-term cost differences.
  • Ignoring the three-day CD review period — don’t sign until you’ve reconciled the CD with your expectations and asked about any surprises.
  • Missing the rate-lock window — rate locks expire, and an expired lock can lead to a different rate on the CD.
  • Overlooking escrow, insurance, or prepayment penalties — these affect your real monthly cost and payoff strategy.
  • Failing to verify payoff instructions — ensure your old servicer will be paid correctly and that no residual balances remain.

Short FAQ

Q: How long between the Loan Estimate and the Closing Disclosure?

A: The lender must provide the LE within three business days of your application. The CD must be provided at least three business days before closing. The time between the two can vary depending on underwriting speed and how quickly you choose to move forward.

Q: Can closing costs increase from the LE to the CD?

A: Yes — some fees can change due to “changed circumstances” (like a different appraisal cost or borrower-requested changes). However, certain lender-imposed fees are generally not allowed to increase without a valid reason. Ask your lender to explain any increases.

Q: What should I do if the Closing Disclosure has an error or unexpected charge?

A: Contact your loan officer or closing agent immediately, request a corrected CD if necessary, and do not close until discrepancies are resolved. Depending on the nature of the change, a revised three-day waiting period may begin.

Q: Can I switch lenders after getting a Loan Estimate?

A: Yes. The LE is provided so you can shop. If another lender offers better terms or lower costs, you can choose that lender. Be mindful of application costs (appraisal, credit pulls) when shopping multiple lenders.

Understanding the LE and CD gives you control when refinancing. Read both closely, ask questions about anything you don’t understand, and use the three-day review period to make sure the numbers match your expectations before you sign.

META: Loan Estimate vs Closing Disclosure on a refinance

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