Loan Estimate Explainer | Compare Mortgage Closing Costs (2024)

FAQs

Does a loan estimate include closing costs? ›

The form provides you with important information, including the estimated interest rate, monthly payment, and total closing costs for the loan. The Loan Estimate also gives you information about the estimated costs of taxes and insurance, and how the interest rate and payments may change in the future.

It's important to compare your Closing Disclosure with your initial Loan Estimate to identify any discrepancies. If you notice any differences, including an increase in the mortgage interest rate or borrowing costs, you need to talk to your lender before you sign.

According to the Consumer Financial Protection Bureau's final rule, the creditor must deliver the Closing Disclosure to the consumer at least three business days prior to the date of consummation of the transaction.

Under the TRID rule, credit unions generally must provide the Loan Estimate to consumers no later than seven business days before consummation. Members must receive the Closing Disclosure no later than three business days before consummation.

Some mortgage costs can increase at closing, but others can't. It is illegal for lenders to deliberately underestimate the costs on your Loan Estimate. However, lenders are allowed to change some costs under certain circ*mstances. If your interest rate is not locked, it can change at any time.

A good way to remember the documentation you'll need is to remember the 2-2-2 rule: 2 years of W-2s. 2 years of tax returns (federal and state) Your two most recent pay stubs.

The 28% / 36% Rule

To use this calculation to figure out how much you can afford to spend, multiply your gross monthly income by 0.28. For example, if your gross monthly income is $8,000, you should spend no more than $2,240 on a monthly mortgage payment.

A mortgage servicer may not make a first notice or filing for foreclosure until the borrower is more than 120 days delinquent. The 120-day period under the rules is designed to give borrowers time to learn about workout options and file an application for mortgage assistance.

Once issued, the terms of the loan estimate are good for 10 days. As long as there aren't any major changes to your application or financial situation, your lender has to honor the estimate if you begin the process of securing the loan within that time frame.

The mortgage closing costs may be different if something important changed or wasn't included in your Loan Estimate. It's also possible that your income or assets turned out to be different from what you estimated when you first applied.

How accurate is a loan estimate? ›

By law, final loan costs must be within 10% of the amount shown on the LE. Mortgage rates change daily, however, so if you are getting a loan estimate from more than one lender, you'll want to try to get them all on the same day so that you're seeing an accurate comparison.

It is possible for your lender to find a last-minute red flag and back out of the contract. In other words, getting denied after the Closing Disclosure is issued is possible. This is why it is important to make sure there are no major changes to your credit or income during this period.

You should request to do a formal walk-through of the home 24 hours before closing. During the walk-through, be sure to check that all required repairs have been made, the home is in the agreed upon condition, and that the seller has completely vacated the property. Read closing documents.

1 week out: Gather and prepare all the documentation, paperwork, and funds you'll need for your loan closing. You'll need to bring the funds to cover your down payment, closing costs and escrow items, typically in the form of a certified/cashier's check or a wire transfer.

The loan estimate can help you understand any mortgage you apply for, whether you're buying a home or refinancing one. For the amount, type, and term of the loan you've applied for, the loan estimate will show your projected closing costs, monthly payment, interest rate, and annual percentage rate, among other details.

Yes, closing costs can be included in a mortgage loan. This is also known as “rolling” closing costs into a loan. The downside of rolling closing costs into a loan is that you will be paying interest on the closing fees, so you'll pay more for your mortgage in the long run.

In order to achieve an 80% LTV, borrowers need to make a down payment of at least 20%, plus closing costs. While 80% is considered adequate, conservative homeowners may want even lower LTVs in order to reduce their monthly payments or try to qualify for better interest rates.