Can Cash to Close Change After the Closing Disclosure?

The closing disclosure is one of the most important documents you’ll receive when buying a home. This form must be provided by your lender at least 3 days prior to closing and provides the final details of the loan, including the all-important cash to close amount – the money you need to bring to the closing table to complete the purchase. But can this cash to close number change at the last minute after closing disclosure is provided?

Can the Cash to Close Change After Closing Disclosure?

Once you receive the final closing disclosure, the cash to close amount generally should not change. However, in certain cases, such as certain additional closing costs or credits, errors in disclosed information, there may be exceptions. The TILA-RESPA rule provides consumer protections and limits the amount of any increase in the borrower’s cash-to-close amount.  Even the slightest change obligates the lender to issue a revised closing disclosure, but certain changes do not trigger a new 3-day waiting period after the new disclosure. 

Exceptions where cash to close may change after closing disclosure

1. The seller agrees to pay additional closing costs that were not disclosed on the original form. This would decrease your cash to close amount.
2. There are errors or changes in the information previously disclosed, such as the escrow amounts, recording fees or title charges. These may result in minor increases or decreases.
3. New information or fees are discovered that were unknown at the time the disclosure was provided. This could increase the cash to close amount.
4. Other changes that do not: (a) increase the annual percentage rate (APR) of the loan by more than 1/8th of a percent, (b) result from a change in the loan product, or (c) relate to the addition of a prepayment penalty associated with the loan 

Outside of those reasons, the lender cannot increase the cash to close once the final disclosure is issued. If they do attempt to bump up the amount, the entire CD needs to be redisclosed at least 3 days prior to closing. Even with a 3-day redisclosure, there are further limitations to what changes a lender can make under the TILA-RESPA rule.

What is the Closing Disclosure?

The closing disclosure is a 5-page document that the lender is required to provide to the borrower at least 3 business days before the closing date. This form consolidates and replaces the HUD-1 settlement statement and final Truth-in-Lending disclosure.

The closing disclosure contains the final loan terms, projected payment schedule, total closing costs, and the final dollar amount the buyer will need to pay at closing. This is called the “cash to close” amount.

The cash to close includes down payment, closing costs, prepaid taxes and insurance, and any other fees and adjustments. Basically, it’s the bottom line – the total amount of money the home buyer will need to bring to the closing table to complete the purchase.

TILA-RESPA Rule Protections

The TILA-RESPA (Truth in Lending Act and Real Estate Settlement Procedures Act) Integrated Disclosure rule was implemented by the Consumer Financial Protection Bureau (CFPB) to simplify mortgage disclosures and better protect consumers. One key protection is the closing cost limitation.

Under this rule, if the lender issues a revised closing disclosure with a higher cash to close within 3 business days of closing, they have violated the law. There are a few exceptions where increases are permitted:

1. The APR decreases, or increases by no more than 1/8 of a percent
2. Changes resulting from negotiations between buyer and seller, such as tax prorations
3. Errors, revisions and additions noted above
4. Extensions of the interest rate lock period

Unless the increase falls under one of those categories, the lender cannot legally increase the cash to close once the final disclosure is issued. If they do, they are liable for refunding or crediting the excess costs over the disclosed amount.

What is APR? 

APR stands for Annual Percentage Rate. It represents the total cost of a loan, including interest and fees, expressed as an annualized percentage rate.

The APR gives home buyers a way to compare the true cost of different loan options. It incorporates not just the interest rate but also points, origination fees, and other charges that get financed into the loan amount.

So for example:

• Loan A has a 3.5% interest rate and $3,000 in loan fees
• Loan B has a 3.625% interest rate but no fees

Loan B has the higher interest rate but Loan A may have the higher APR due to the fees.

Why does a decrease in APR allow a change in Cash to close after disclosure?

Under TILA-RESPA, the borrower is protected from certain last minute changes by the lender.   the APR decreases by more than 1/8th of 1 percent (0.125%) after the final closing disclosure is issued, the lender is allowed to increase the cash to close amount without violating the rules.

This exception exists because a lower APR is seen as favorable for the borrower. But outside of specific reasons like this, lenders cannot alter the cash to close once the final disclosure is provided.

How to Avoid Unexpected Change in Cash to Close?

To avoid any surprises or confusion about what you owe at closing, here are some tips:

• Review the final closing disclosure in detail as soon as you receive it to ensure accuracy. Review with your loan officer to identify any discrepancies immediately.
• Maintain constant communication with your lender up until closing day. Check if any changes are anticipated.
• Ask for written confirmation from your lender if they state the cash to close has increased. Document any increases.
• Bring a print copy of the final disclosure to closing and compare it to the figures on the settlement statement.
• Be prepared for minor variations in the cash to close amount (a few hundred dollars), but if it looks substantially higher, ask your attorney or reach out to your lender to make sure proper written notice was provided.
• Work closely with your real estate lawyer and agent, and don’t hesitate to stall closing if you suspect violations.

The Bottom Line

Thanks to the protections under TILA-RESPA, once you receive the final closing disclosure, you can be confident the cash to close amount is accurate, or very close. Barring any legitimate changes, lenders cannot sneakily increase this crucial number at the last minute. Carefully review the disclosure and maintain contact as you approach the finish line. With diligence and close communication, you can avoid cash to close surprises.