So Many Documents, What Do They Mean?
Once you have begun the process to buy, build or even refinance your home you will have many decisions to make. Your decisions will range from what color tile to choose for the master bathroom to seeking out the most comprehensive home owner’s insurance. Quite possibly beyond all your other decisions, your most important decision will be the terms of your mortgage financing you choose. The interest rate and mortgage term along with the total loan charges you choose will be the most impactful for your financial future. Thankfully, the federal government (never thought I would write those words) has made it mandatory that you receive specific disclosure forms that inform you about all the financial details of your mortgage loan. In this post, we will review the Loan Estimate and the Closing Disclosure due to their importance to understanding your loan terms and charges
Loan Estimate
According to the CFPB a Loan Estimate is a three-page form that you receive after applying for a mortgage. This is the first important disclosure in the mortgage process because it will allow you to confirm the interest rate, APR, monthly payment and closing costs. This document is equally important to make sure your loan terms (fixed or ARM) are accurate as you choose. Also within the loan estimate you will have a complete itemization of your loan charges. Scan this document and your fees and make sure to point out to your mortgage representative any concerns you see. It is worth mentioning that this disclosure is called an Estimate for a reason and most likely will change as your mortgage loan moves through the process so don’t fret if some of the fees are not exactly to the penny. Changes may occur and new Loan Estimates may be produced along the way.
Final Closing Disclosure
Although you will have many other loan disclosures that required your signatures including the Loan Estimate, the Final Closing Disclosure is by far the most important disclosure you are presented with because it will have your final loan terms, payment, and fees. To define the Closing Disclosure more specifically, your CD or Closing disclosure is a five-page form that provides final details about your mortgage loan. Also, the closing disclosure starts the clock from which you can sign your loan documents and fund your home loan. Because of this, your lender is required to give you the Closing Disclosure at least three business days before you close on your mortgage loan. This three-day window allows you to confirm your final loan terms and costs with that of your loan estimate. If you notice any significate discrepancies, the three-day window allows time for your lender to fix and remedy any issues.
The Key To Documents
You will receive a significant amount of paperwork when you are procuring financing for your new home, your Loan Estimate and Closing Disclosure contain important figures that will help you confirm the accuracy of your loan pricing but also to keep you informed and confident that you a making a sound financial decision. The key to understanding each disclosure will depend on the responsiveness of your mortgage professional in addition to a little research of your own. It is also essential to express any concerns early in the disclosure/mortgage loan process. If you have been sold a mortgage loan that is not competitive or inaccurate from your original quote, you will have enough time to switch lenders and stay on track.
