Your lender is required by law to give you the standardized Closing Disclosure at least 3 business days before closing. This is what is known as the Closing Disclosure 3-day rule. This requirement is thanks to the TILA-RESPA Integrated Disclosures guidelines, which went into effect on October 3, 2015.
Prior to these rules, home buyers received two documents: the HUD-1 Settlement Statement and the Truth in Lending Disclosure Statement (instead of the Closing Disclosure). There were two problems with these previous documents: they were confusing, and they were only provided at closing – which offered home buyers very little opportunity to review and make sense of them.
The Closing Disclosure’s 3-day rule now gives you plenty of time to go over the final terms of your loan before you sign your closing documents.
How Does The 3-Day Rule Affect The Closing Disclosure Timeline?
Because of the 3-day rule, the sequence of events leading up to you receiving a Closing Disclosure should be relatively predictable. Lenders are generally careful to avoid issuing a Closing Disclosure before they are certain about what the closing costs and fees will be; they don’t want to have to change the agreement and wait another 3 business days. Source
This means that loan approval, home appraisal, insurance and the calculation of all third-party fees will be completed before the Closing Disclosure is issued to you. The timeline will therefore look like this:
- All costs are calculated.
- The Closing Disclosure form is issued.
- The 3-day rule goes into effect.
- You sign the form.
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