Once you enter the home buying process, you’ll have a lot of new decisions to make and documents to understand. Your decision will mostly be around home choices like interior design options and finding the best home owner’s insurance. Aside from those choices, the most critical decision will be the terms of our mortgage financing. The combination of interest rate, mortgage term, and loan charges will greatly impact your financial future. The good news is the federal government has made it mandatory that you receive specific disclosure forms that detail all the financial details of your mortgage loan. In this post, we’re going to take a look at the Loan Estimate and Closing Disclosure to help you better understand the role they play in helping you understand your mortgage loan terms and charges.
The Loan Estimate
Your loan estimate is a three-page form that you’ll receive after applying for your mortgage loan. This document is the first important disclosure in the mortgage process, allowing you to confirm your interest rate, APR, monthly payment, and closing costs. This document will also help you see if your loan terms (fixed or ARM) are accurate and reflect what you chose. Additionally, your loan estimate disclosure should have a complete itemization of your loan charges.
After receiving your loan estimate document, you need to read through it carefully. After reviewing, make sure to point out any concerns you have to your mortgage representative. This document is called an “Estimate” because it can and will likely change as your mortgage advances through the process. As changes occur, you should receive a new loan estimate along the way.
The Final Closing Disclosure
You will have many loan disclosures that require your signature as you progress, but the Final Closing Disclosure is the most important. It will show your final loan terms, payments, and fees. More specifically, your CD or Closing disclosure is a five-page form that provides the final details about your mortgage loan.
Additionally, the closing disclosure starts the clock from which you can sign your loan documents and start funding your home loan. Your lender is required to give you the closing disclosure at least three business days before your closing date. This time allows you to thoroughly review the document and check for any discrepancies before the final signing.
The Key to Understanding Your Disclosures
The key to understanding each disclosure you receive will depend on your mortgage professional’s responsiveness and your own research. The more you educate yourself, the better. At the same time, a good mortgage professional should be able to assist you throughout the process and add clarity to your questions.
If you have questions or concerns, it’s critical that they’re addressed early in the disclosures mortgage loan process. If you find that you’re being sold a mortgage loan that is not competitive or inaccurate from your original quote, you will have time to switch lenders and stay on track with purchasing your new home.
