Some lenders don’t make borrowing money easy. They put hurdles and paperwork in front of you.
That paperwork includes a Loan Estimate, so you should know what information you need to provide to get your loan.
What is a loan estimate?
The federal government’s Consumer Financial Protection Bureau says, “The Loan Estimate tells you important details about the loan you have requested.” Lenders must provide this three-page form within three business days of receiving your loan application.
This lender disclosure provides you with the following:
- Estimated interest rate
- Monthly payment
- Total closing costs
The Loan Estimate lists the estimated costs of taxes and insurance. It describes how interest rates and payments may change. And, it discloses any prepayment penalty or negative amortization if applicable.The government specifies the Loan Estimate must use clear language and a format that makes it easy for borrowers to read and understand.
Just because you receive a Loan Estimate does not mean your loan application has been approved or denied. But, it does lay out the terms of your loan in a format you can compare with Loan Estimates from other lenders.
These numbers are not firm. They are good-faith estimates that come from the lender’s experience, lending regulations, and market norms.
What information do you need to provide in order to get it?
To prepare and provide a Loan Estimate, the lender requires the following information:
- Name of applicant(s)
- Income for each applicant
- Social Security number(s) to secure your credit report
- Address of property to be mortgaged
- Estimated value of the property, and
- Desired loan amount
You can also provide information to help the lender create a Loan Estimate specific to your situation and wishes. It’s an opportunity to tell the lender what you want:
- Fixed or adjustable interest rate
- Amount of down payment
- Conventional, FHA, VA, USDA, or another specific loan type
- Monthly, upfront, or combination mortgage insurance premium
- Upfront points
- Available lender credits
- Include taxes and homeowner’s insurance premium in monthly payments
Lenders and loans differ, so knowing what type of loans work best for you can be important. You can find helpful information at www.LoanReviewHQ.com
Things to look for
You may be excited about receiving your Loan Estimate because it is one process out of the way. But, Credit Karma recommends looking carefully at your Loan Estimate for the following fees:
- Appraisal fees must be performed by a certified third-party. It’s an important process for lenders to calculate the loan-to-value ratio. It’s a one-time fee and depends on the area where you live and the square footage of the property.
- Home inspection fees are optional, but the lender may require a home inspection to verify the house is livable and sound. The fee will depend on the area where you live.
- Credit report fees may be passed on to you from the lender. But, they may use their own risk-analysis to determine your creditworthiness which may be different from that score at your credit reporting agencies.
Your Loan Estimate may also include lender administration fees, Homeowner Association fees, loan origination fees, title fees, taxes, and mortgage insurance.
What you need to know about your Loan Estimate
The Loan Estimate is a government mandated part of the loan process. You must understand that all the items listed are estimates and subject to increase. But, it is also true many of them are subject to negotiation. So, you must take the form seriously.