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The Value of a Home Loan Estimate

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When applying for a mortgage, the most important document you’ll review is your Loan Estimate. The Consumer Financial Protection Bureau created this standardized form in October 2015. It replaced the Good Faith Estimate that borrowers had previously been given by the lender.

 

The form explains the key terms of your home loan—including interest rates, estimated monthly payments and closing costs. Amy Moser, vice president of mortgage services at Mountain America Credit Union, shares, “Requesting and viewing Loan Estimates gives borrowers the opportunity to find the loan that’s best for them. While a borrower will still receive a similar Closing Disclosure form on signing day, the Loan Estimate makes it easier for borrowers to understand exactly what type of loan they are being offered.”

 

Mortgage companies and financial institutions must provide this form within three business days of receiving your application. Here are a few things to watch for:

 
  1. Ensure the loan amount and interest rate match the numbers previously discussed with the lender.
     

  2. Look over the Projected Payments tabs for the three major parts of your loan payment—principal & interest, mortgage insurance and estimated escrow which includes property taxes, homeowners insurance and association fees (if applicable). These amounts may fluctuate throughout the life of your mortgage depending on the loan type.
     

  3. Confirm whether the loan is an adjustable-rate or fixed-rate mortgage. An adjustable-rate loan usually means that the borrower receives a lower interest rate during the first five–seven years. After that time, the interest rate can rise and fall at specified intervals for the remainder of the loan term. A fixed-rate loan is locked in at the beginning of the mortgage and remains the same for the life of the loan.
     

  4. Review the origination costs including the application and underwriting fees as well as the appraisal cost.
     

  5. Determine if you are paying points, also known as buying down the rate. This means a borrower may plan to prepay interest at closing in exchange for a lower interest rate.
     

  6. Confirm the amount you need to bring to closing. Most lenders expect this amount will be submitted as a wire or certified check.

 

Talk to your lender if the terms on the loan do not match your expectations and get clarification on any numbers that don’t make sense. Borrowers may also use the Loan Estimate form to confirm that the loan details match the Closing Disclosure once everything has been finalized.

 

Have questions about getting a mortgage through Mountain America Credit Union? Visit our website, come into a local branch or give us a call at 800-748-4302.

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