Understanding the New Loan Estimate

Written By: Melandie Rota

The new Loan Estimate is designed to help consumers make informed decisions when shopping for a mortgage and understanding the key features, costs, and risks of the mortgage loan for which they are applying for. The Loan Estimateprovide information to help consumer decide if they can afford the loan and to compare the cost of different loan approvals.   The Loan Estimate will help consumers to avoid costly surprises at the closing table.  The Loan Estimate is three page long that is very easy to read.  The Loan Estimate must be provide to the consumers no later than three business days of receipt of application.The form is only used on closed-end consumer mortgages.  The Loan Estimate also benefit lenders by cutting down on redundancy.  

** Need Mortgage Training? CLICK HERE to Download Brochure **

The first page of Loan Estimate have 4 sections which disclosure the essential closing, transaction and loan details.  The first section is general information which includes the date Loan Estimate issued to consumer, applicant name, property address, sale price, loan term, purpose, product, loan type, loan ID and rate lock.The second section is Loan Terms table which disclose the loan amount, initial interest rate, initial monthly principal & interest amount, pre-payment penalty and balloon payment.  The third section is the Projected Payment table that show estimate of the periodic payments the consumer will make over the life of the loan. The Projected Payment table disclose principal & interest, mortgage insurance, estimated escrow, estimated total monthly payment and estimated taxes, insurance, and assessments.  The fourth section is the Costs at closing table which show the calculation of Estimated Closing Costs and Estimated Cash to Close.

Second page of the Loan Estimate is broken down into fivesections which itemize of closing cost.  First section is the Loan Costs which is letter A Origination Charges such as origination fee, application fee and underwriting fee. Letter B is the Services You Cannot Shop for such as Appraisal Fee, Credit Report and Flood Determination Fee.  Letter C is Services You Can Shop For such as Pest Inspection Fee, Survey Fee and Title Insurance Binder.  The sum of the subtotals of Origination Charges, Services You Cannot Shop For and Services You Can Shop For is the Total Loan Costs.  The second section is the Other Costs which discloses taxes and other government fees, prepaid, initial escrow payment at closing, other items, total other costs and total closing costs.  The third section is Calculating Cash to close which disclose the total closing costs, closing costs financed, down payment/funds from borrower, deposit, funds for borrower, seller credits and adjustments and other credits.   The last two sections Alternative calculating cash to close table and Estimated payoffs and payments are used for only transaction with seller or refinance.

The final page disclose lender contact information, a comparisons table to compare loan with other loans and other considerations table such as appraisal, assumption, homeowner’s insurance, payment, refinance and servicing.  The lender may have signature line for acknowledge of receipt of the loan estimate. The consumer in not required to sign the Loan Estimate. The new Loan Estimate benefit both the consumer and lender in many ways.

About The Author

Melandie Rota - Along with being a Mortgage University Instructor, Melandie is currently serving as a Senior Mortgage Loan Underwriter.  She has over 15 years of experience in the mortgage industry. She served as a Loan Processor, Senior Processor, Processing Manager, Loan Originator, Mortgage Underwriter, Due Diligence Underwriter and Senior Mortgage Loan Underwriter.  She is very dedicated in teaching and leading beginners in the mortgage industry. If you're interested in becoming a writer for NAMP®, please email us at: contact@mortgageprocessor.org.

Opinion-Editorial (Op-Ed) Disclaimer For NAMP® Library Articles: The views and opinions expressed in the NAMP® Library articles are those of the authors and do not necessarily reflect any official NAMP® policy or position. Examples of analysis performed within this article are only examples. They should not be utilized in real-world application as they are based only on very limited and dated open source information. Assumptions made within the analysis are not reflective of the position of NAMP®. Nothing contained in this article should be considered legal advice.