Taking out a mortgage and buying a home can be a daunting task, but we have good news! In October 2015, the federal government took steps to make the home-buying process easier.
Known as the “Know before you owe” rules, the new regulations have many benefits for consumers. Chief among these is the replacement of the Good Faith Estimate and the Truth-in-Lending forms with a single new standardized document called the “Loan Estimate” form.
The Loan Estimate form eliminates overlapping information between the two previous forms and makes everything more straightforward. The new form is standardized and requires all lenders to provide the same information using the same language and format. This makes shopping for – and comparing – loans much easier.
What information is on the Loan Estimate?
Information provided in the Loan Estimate contains all the details about the mortgage loan in 10 simple sections:
- Basic transaction information, including your name, property address, sale price, etc.
- Loan terms, such as loan amount and interest rate.
- Projected payments – this lists your projected monthly mortgage payment.
- Costs at closing – a detailed overview of closing costs.
- Loan costs – the charges associated with the loan.
- Other costs, such as taxes, prepaid, escrow, etc.
- Calculating cash to close – this section outlines the specific amount of money needed for closing.
- Comparisons that allow you to review the loan against loans from other lenders.
- Other considerations, such as disclosures and other terms.
- Confirm receipt – this is where you sign the document to confirm you have received it.
The document is three pages long and by law is required to be given to you within three days of the original mortgage application.
Your lender will consider the application in process when you provide them with these six pieces of information:
- Your name and the co-borrower’s name (s), if applicable
- Your income
- Your Social Security number and that of any co-borrower(s)
- The property address
- The estimated value of the property
- The mortgage loan amount
When you receive a Loan Estimate, it should reflect a particular loan you discussed with a lender. Check to see that everything matches your expectations. You should confirm everything from the spelling of your name, the loan amount, the interest rate, the type of loan, etc. If you find something that doesn’t match your expectations, go back to your lender and ask why.
The Consumer Financial Protection Bureau provides an interactive example of the form on its website and we encourage you to take a closer look at it.
If you have questions about this new form, please don’t hesitate to reach out to your local mortgage banker at MidWestOne. We’re happy to help!