The loan estimate indicates all of the important details about your requested loan. It allows you to know what you can expect to pay if you accept a certain mortgage offer.
A loan estimate is a three-page form that you will receive after you apply for a mortgage. The forms show the estimated amount, down payments, taxes, insurance covered, interest rate, and other loan charges.
When do you get a loan estimate?
Upon submission of a mortgage application, you will receive the documents three business days later from the lending company. It doesn't necessarily mean that your loan is approved. It shouldn't also be confused with a closing disclosure. The documents also provide how much will be your monthly fees and closing costs. You can compare your closing disclosure with your loan estimate to see the final costs and terms.
To get a loan estimate, you will receive a document from your lender upon submitting the application request. You must provide details in your request: your name, your property address with the estimated property value, your income, your Social Security Number, and your desired amount. The lender could use your Social Security Number to check your credit.
If you agree with the terms cited, you may proceed with your application. You must submit an agreement or intent to proceed to your loan officer. However, if you do not agree with the terms offered, you may take no further action. A lender must honor the terms of estimate within ten business days.
Certain costs in the loan estimate may change. However, the lender's fees and taxes are fixed. If there are changes, you will receive a revised loan estimate. It will indicate whether each listed amount can increase after closing.
Sections of the loan estimate
The first section of the page includes the Loan Terms, the most important element of your loan. It contains the details about your loan amount, interest rate and interest payment, and estimated monthly principal. You will also know if you will pay a prepayment penalty - a fee for paying off your loan early - or balloon payment, a large payment made at the end of the term.
On the same page is the Projected Payments. Here, you can check the expected monthly mortgage payment. The amount includes the loan principal, taxes, escrow, interest, and insurance details.
The Costs at the Closing section contains the expected closing costs, prepaid insurance, title insurance, appraisal fees, and your down payments. It also appears on the first page of the loan estimate form.
The second page comprises loan costs, other costs, and calculating cash to close sections. Loan Costs indicates the costs associated with originating, underwriting, and processing your loan. In this section, you will see a list of "Services You Cannot Shop For" and "Services You Can Shop For." It might include the costs on your house title, survey fees, and pest inspection fees.
Uncontrollable fees, including taxes, transfer fees, homeowners insurance details, and prepaid interest, are under Other Cost. It is found on the same page.
Meanwhile, under Calculating Cash to Close, you will see details about your down payment, loan costs, seller credit (if applicable), deposit, and other adjustments.
On the last page, you can see the details for comparing different loan offers regarding principal versus interest and other fees that you need to pay in five years. The annual percentage rate and percentage of the interest are also included in this section. Statements about the loan terms, late payment fee, and refinancing details is under Other Considerations section.
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