In what key way do closing disclosures differ from loan estimates?

Closing disclosures and loan estimates serve distinct purposes in the lending process, providing information at different stages and levels of accuracy. Closing disclosures represent the final terms of the loan, detailing the specific costs associated with the loan, including the interest rate, monthly payments, and closing costs, as well as any adjustments made since the initial loan estimate. This document is typically provided to borrowers at least three days before closing, allowing them to review the final terms and ensure everything aligns with their understanding and expectations.

On the other hand, loan estimates are provided much earlier in the process and are essentially a projection of what the borrower can expect in terms of costs and fees associated with the loan. While these estimates are designed to give borrowers a good idea of what to expect, they are not set in stone and can change as the loan progresses and more information becomes available. Thus, the loan estimate is a preliminary document meant to help borrowers shop for loans, while the closing disclosure is definitive and coincides with the actual closing of the transaction.