What is the loan estimate?
A loan estimate is a three page form the borrower receives from the lender after applying for a mortgage, according to the Consumer Financial Protection Bureau (CFPB). The letter will include information and details associated with the loan.
What do will you find on the loan estimate from?
The loan estimate will include details about the loan application. The lender will provide this form to the borrower within three days.
The loan estimate will include the following information.
- The amount of money the borrower is qualified for
- Estimated interest rate
- Estimated monthly payments
- Total closing costs
- The estimation of the cost of insurance
- How much you should expect to pay in taxes
- How interest may change in the future
- Penalties and charges applied when the borrower fails to meet payment requirements
- Etc.
What does the loan estimate tell you?
The borrower must understand loan estimates do not represent approval letters. Instead, it shows you what to expect if you choose to get a mortgage with the lender. More information will be required before you are approved for the mortgage.
Some of the following requirements must be met before you are approved for the mortgage or loan.
- Find a house
- Submit an offer and get it accepted
- The lender must approve the seller of the house as well (the seller must have a legal right to the house they are selling)
- The appraisal and house inspection must be completed
- Etc
Once your you are approved for the mortgage, you will receive a loan commitment letter.
