When you’re in the market to buy a home and need a mortgage loan, it’s essential to understand the loan estimate and the closing disclosure. The loan estimate is a detailed summary of the loan terms, fees associated with taking out a mortgage, the loan amount, interest rate, and monthly payments. The lender is required to provide this information to you within three business days of your loan application.
What is The Loan Estimate?
The loan estimate is an essential document because it provides you with an estimate of the costs associated with your mortgage loan. This estimate is based on the information that you provide to your lender at the time of your loan application. However, the data that the lender has can change during the underwriting process, which can cause the closing disclosure to show higher costs or a higher interest rate than what you were initially expecting.
What is The Closing Disclosure?
The closing disclosure is the final accounting of all your closing costs. According to Rocketmortgage.com, you should receive this document at least three days before the closing date. It’s crucial to compare the numbers line by line with the loan estimate and contact your lender if you find a discrepancy.
Some Things Change, While Others Stay the Same
It’s important to note that some costs associated with your mortgage loan cannot change. These include loan origination fees, fees paid to the lender’s third-party service providers, and transfer taxes (typically paid by the seller). However, other costs, such as prepaid interest between closing and the end of the month, can change. Additionally, some costs have limits on how much they can change, including mortgage recording fees and some third-party services.
Always Review
While it’s understandable to feel overwhelmed with all the financial information associated with a mortgage loan, understanding the loan estimate and closing disclosure is critical. These documents provide you with an estimate of the costs associated with your mortgage loan and the final accounting of all your closing costs. By reviewing these documents carefully and contacting your lender and REALTOR with any questions or discrepancies, you can ensure that you’re fully informed about the costs associated with your mortgage loan.
