The ribonucleoprotein enzyme telomerase maintains telomeres and is essential for cellular immortality in most cancers. Insight into the telomerase mechanism can be gained from syndromes such as dyskeratosis congenita, in which mutation of telomerase components manifests in telomere dysfunction. We carried out detailed kinetic and thermodynamic analyses of wild-type telomerase and two disease-associated mutations in the reverse transcriptase domain. Differences in dissociation rates between primers with different 3' ends were independent of DNA affinities, revealing that initial binding of telomerase to telomeric DNA occurs through a previously undescribed two-step mechanism involving enzyme conformational changes. Both mutations affected DNA binding, but through different mechanisms: P704S specifically affected protein conformational changes during DNA binding, whereas R865H showed defects in binding to the 3' region of the DNA. To gain further insight at the structural level, we generated the first homology model of the human telomerase reverse transcriptase domain; the positions of P704S and R865H corroborate their observed mechanistic defects, providing validation for the structural model. Our data reveal the importance of protein interactions with the 3' end of telomeric DNA and the role of protein conformational change in telomerase DNA binding, and highlight naturally occurring disease mutations as a rich source of mechanistic insight.