What Is The Mortgage Loan Estimate?
In this guide on what is The Mortgage Loan Estimate, we will cover the loan estimate (LE) in general and detail each section of the LE. We will further cover the importance of the loan estimate and what borrowers need to pay attention to. Receiving a loan estimate is a required part of the mortgage loan process. However, one thing homebuyers need to understand is the figures on the loan estimate are generally over-disclosed. Over disclosing numbers are figures that are inflated.
Whatever number on the loan estimate, you can rest assured it will be lower on the closing disclosure, often referred to as the CD. The rules and regulations state if the loan officer does not know the exact number to disclose on the loan estimate, they can over disclose and that will be fine. If the loan officer were to under-disclose by more than 10% of the actual cost of the line item, the loan officer and/or the lender is responsible for the under disclosed amount.
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What To Expect In The Loan Estimate
Despite the necessary nature of this step in the process, many people are not familiar with the mortgage loan estimate and what exactly you should be looking for, and what to expect. It is an important financial tool to use for your own budget. In the following sections of this guide, we will be covering what the mortgage loan estimate is and the information it contains. Loan officers are mandated by law to disclose the mortgage loan estimate no later than three days once the borrower completes a mortgage loan application.
Understanding The Mortgage Loan Estimate
Understanding your finances and having a written plan is key to success, so a document detailing every aspect of a mortgage loan is very important. The details are not just important for budgeting purposes though, they also include the loaners’ terms. Violation of these terms such as a late payment can result in increased money leaving your pocket. So understanding the loan estimate is unmistakably important. A loan estimate is an informative tool that is for your benefit. Ignoring the information presented on this document is simply choosing ignorance over being up to date with the finances presented to you.
What Does The Mortgage Loan Estimate Show?
It shows you the estimated interest rate, monthly payment, and total closing costs for the loan. Now if you think that this information is not important because you have already heard it from the loan officer, that is another mistake. The information is more recent and any changes that may or may not have been made are now processed. The reason this change might occur is that the loan officer’s original estimate if they give it to you may not have had all the necessary information for the correct loan. And in most cases, the official loan estimate is the first time you will see this information.
How Accurate Is The Mortgage Loan Estimate?
If a loan officer tells you the amount before or if they do not, the official loan estimate is still important information in both cases. Seeing this can help you start budgeting your finances for the future once mortgage payments are occurring. These three things are not the only details that are important to view on the loan estimate. The cost of taxes and insurance is also listed on the estimate. The loan estimate also explains how the interest rate and payments might be subject to change in the future.
What Items Appear on The Mortgage Loan Estimate?
It is the all-in-one document that explains the full financial situation of a mortgage loan. However, there are some things that need to be done on your part to receive a loan estimation. These things are your name, social security number, income, property address, desired loan amount, and estimate of the property’s value. Once this information is given to the loan officer, the loan estimate is ready to be calculated and given to you in its entirety. This financial tool is in your hands and should be utilized to understand the purchase of the loan.
Are All Information on The Mortgage Loan Estimate The Same?
This information is a standard process and is absolutely necessary for achieving the best possible estimate for your mortgage loan. Also important to note is that the social security number is so the lender can pull a credit report. And this might go without saying to most people but try having the best credit possible for a better chance of being approved and for better conditions on the loan. A lender will be much more willing to work with you if your credit score is high.
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Does The Loan Estimate Mean The Same As a Mortgage Approval?
Some misconceptions do need to be addressed before we close, being given a loan estimation does not automatically mean that you are approved for said loan. All that it means is that these are the terms and conditions for the next steps forward by the lender if the process keeps progressing.
What Happens If Borrowers Do Not Get a Loan Estimate?
It is not an option rather federal law borrowers get a Loan Estimate, commonly referred to as LE, three business days after submitting a mortgage loan application. Another misconception is that nothing can be done if on occasion a loan officer denies the request for a loan estimation, nothing can be done. This is just not true.
You can file a complaint as the loan estimation is an important part of the mortgage loan process for you to understand your financial situation and the terms you are agreeing to. The complaint should get them to send the loan estimate as they should have before. And if this process fails then using a different lender is always an option.
The Importance of The Loan Estimate In The Mortgage Process
To summarize, you can better understand the mortgage loan process by using the estimate. It tells you every financial detail of the mortgage loan for your own budgeting, so you can follow the loaner’s terms. This loan estimate is a valuable tool for you and in the off chance that it is denied, make sure you receive it by filing a complaint. All of this is just one step in the process of owning your dream home. Get through the process and live the life you want, in the home you want.
Frequently Asked Questions (FAQs)
- What is the Mortgage Loan Estimate (LE)?
The Mortgage Loan Estimate is a standardized form that provides important details about a mortgage loan you’ve applied for. It includes estimated interest rates, monthly payments, and total closing costs. - Why is the Mortgage Loan Estimate important?
It helps borrowers understand the key terms and costs associated with their mortgage loan, allowing them to make informed decisions when comparing offers from different lenders. - When do I receive the Mortgage Loan Estimate?
Lenders are obligated to furnish you with a Loan Estimate within three business days upon receipt of your loan application. - What information is included in the Mortgage Loan Estimate?
A Mortgage Loan Estimate includes loan terms, projected monthly payments, estimated closing costs, and the interest rate. - How accurate is the information on the Mortgage Loan Estimate?
While the Loan Estimate provides a good faith estimate of your loan terms and costs, actual terms and costs may vary slightly at closing. - Can the terms of the Mortgage Loan Estimate change?
Some terms on the Loan Estimate are legally bound to stay the same. In contrast, others may change within specified limits. Your lender should provide you with a Closing Disclosure form at least three business days before closing, outlining any changes to terms. - Can I negotiate the terms provided in the Mortgage Loan Estimate?
You can negotiate certain terms with your lender, such as the interest rate or closing costs. - What should I do after receiving the Mortgage Loan Estimate?
Review the document carefully, compare it with offers from other lenders if applicable, and ask your lender any questions you may have. Make sure you understand all the terms and costs associated with the loan. - Are there any fees associated with obtaining the Mortgage Loan Estimate?
Typically, lenders can only impose fees once you’ve received and agreed to the Loan Estimate, confirming your intention to move forward with the loan application. - What should I do if I notice errors on my Mortgage Loan Estimate?
Contact your lender immediately to discuss discrepancies or errors in the Loan Estimate. Resolving any issues before proceeding with the loan application process is important.
Talk to an expert Loan Officer here at Gustan Cho Associates by calling (800) 900-8569 or text us for a faster response. You can also email us at alex@gustancho.com. Our expert Loan Officers are available even during weekends and holidays!
