If you have made a mortgage application one of the most critical disclosures that you must receive from your perspective lender or Mortgage Loan Officer within 3 business days of your loan application is called the Loan Estimator. This is not just a simple disclosure. It constitutes a legal document much like a contract between you and your lender. The Loan Estimator must be transmitted to you swiftly. It can be hand delivered to you the same day that you apply. Hand delivery is the most effective method of delivery because it's considered delivered when it is handed to you. If transmitted by email, first you would have had to consent to receiving documents electronically and the delivery of the Loan Estimator is then effective when you have received the email. If transmitted by fax, it is not considered as delivered until the next day after you signed receipt of it and faxed it back to sender. If the Loan Estimator is mailed, delivery is effective 3 business days after the Loan Estimator is mailed.
The Loan Estimator itemizes all of the costs associated with your loan and the Annual Percentage Interest Rate (APR) much like the Good Faith Estimate and Truth In Lending Statement that the Loan Estimator document has replaced for all residential transactions consisting of more than four mortgage installment payments and a finance charge.
The Loan Estimator can't be changed frivolously or even for errors. If so re-disclosure is required, and even then it could only be regenerated under the following circumstances outlined under the Truth In Lending Act (TILA). TILA doesn't permit any exceptions. NONE!
1- Change in APR;
2- Change in Loan Product(a discussion with your loan officer should ensue as to why he or she believes another product is in your best interest. Always inform your attorney of this change in order to determine if it meets the goals of your purchase contract.); or
3- Prepayment Penalty is added.
The purpose of the loan estimator is for you to become familiar with the cost of your loan and the terms of your perspective mortgage payments. With this information in one view, the legislature's intended goal are fulfilled: a. that you be more familiar with your loan product; b. that you become familiar with the cost of the loan in a five year outlook; and c. that you discover alternative options if the suggested loan product doesn't meet your objectives.
Under TILA, the MLO must be diligent in ascertaining all of the anticipated charges in the transaction with few exceptions such as third party expenses, like attorney fees The lender/ MLO is even charged with having to anticipate the termite inspector's fee especially if the lender usually assigns the inspection to a few preferred inspectors. Otherwise the loan officer cannot change the loan estimator if the lender's appraiser's fee is a bit higher then usual. Its important in fact detrimental if a lender doesn't familiarize itself with charges including recording fees. Some degrees of variance exist. Unfortunately, the lender is at risk is it underestimates or overestimates fees payable by the borrower. Errors in itemization often lead to lenders approving lender credits at the closing table in favor of the buyer (borrower) in an effort to cure its mistakes.
Fees and Costs itemized on the Loan Estimator include direct and indirect charges associated with extending you credit; fees required of third party that the lender is affiliated with including broker charges, premiums for insurance related to the tran