When you apply for a mortgage and provide the 6 required pieces of information, a lender must provide a Loan Estimate within 3 business days if the loan is approved. This video explains the basics. The Loan Estimate is a standard form, with required information. Yours will include: Loan terms, including interest and loan schedule Projected payments Costs at closing, including: Total Interest Percentage APR (Annual Percentage Rate) Estimates of costs from lender-recommended providers ("Cant Shop"). Final costs must be in defined limits of these estimates. Estimates of costs that you can shop; these will vary based on your decisions. Be clear that the Loan Estimate is anestimate - not a final, binding contract for loan costs and terms. It will give you a ballpark understanding about this loan, and some limits on the possible changes in final costs. For more assistance (and additional videos) on the specific parts and pages of a Loan Estimate, search "Loan Estimate" on this site.

This video outlines what to expect after youve applied for a mortgage loan. There are 6 required pieces of information for a mortgage loan application, covered in another video here on Video-Genius. Some lenders may request additional information at the time of application, or later. Once you have supplied the 6 required pieces, lenders have to provide a Loan Estimate in 3 business days. Lenders will verify the information you provide, through actions like credit checks, credit history and employment verification. Most lendersmust follow these steps, to assess your ability to repay. (Dont be offended by verification — it is required.) Once information has been verified, and processes like underwriting completed, the lender will make a decision about loan approval. If the loan IS approved, they will deliver a Closing Disclosure detailing all of the costs and terms. If you have a Closing Disclosure already, there are videos here that cover all of the pages and details to help you make sense of it. The Closing Disclosure itself must be delivered to you, 3 business days prior to consummation of the loan. The lender will usually set a date for that loan consummation process; this may also be your closing meeting. For clarity — closing essentially means "transferring ownership", and consummation basically means "committing to the loan." Once you have completed both of these, take a breath and pat yourself on the back! Successfully buying a home is a big milestone. Hopefully you remembered to get the keys so you can start transforming "the property" into your home.

Debt-to-Income (DTI) is one of the key ratios lenders use to assess and approve loan applications. Determining your current financial obligations versus your existing earnings is one part of a lending institutions necessary evaluation of your capability to pay back a loan. Like the video states: financial obligations are existing monetary obligations; a vehicle payment is a financial obligation while a grocery expense is not. To compute your debt-to-income ratio, assemble your month-to-month financial obligation payments and divide them by your GROSS regular monthly earnings. (Gross earnings is the money you make BEFORE taxes and other reductions.) The Federally-established debt-to-income target is currently 43% for Qualified Mortgages, although some experts advise aiming for a more conservative figure — less than 36%. If your DTI is greater than the Federal guidelines, other loans might be available. These may also involve more documentation and data to establish your ability to repay. Rates for these are likely to be different from those offered for Qualified Mortgages. High debt-to-income ratio puts a property owner at higher threat of challenges to making regular monthly payments. Review your scenario and risks thoroughly if DTI is an obstacle.

Federal regulations for mortgage loans require lenders to assess a home-buyer’s likelihood of paying back the loan over the years ahead. As a result, lenders are required to ask about a borrower’s current financial situation and financial history. Lender questions will cover employment, expenses, assets, income and of course credit history and credit rating. The key thing for the prospective home-buyer to understand is that lenders have to ask these questions and make this assessment. These ability-to-repay rules are built into loans that meet Qualified Mortgage guidelines. If you are shopping and comparing loans, keep track of which options are meet the guidelines to be Qualified.

Picture your home loan on one side of a see-saw, and the home itself on the other. Thats a simplified version of LTV — "Loan to Value". Its one of the key ratios involved in setting loan amounts. Lenders frequently set LTV limits. If you know the ratio, you know the upper boundary of loan size, like this: "LTV on this $500K home is 80%." 80% x $500K = $400K max loan. Buyer would need at least $100K down for that loan. LTV also measures equity. If you put $100K down for the example above, you have $100K equity in the home. As a result, higher-LTV loans may require mortgage insurance. With an LTV greater than 80%, the risk of default is high because the homeowner has a lower "stake" in paying off the mortgage.

Laws to provide stable, suitable home financing created a category of loans and lending practices called "Qualified Mortgages." They provide guidance to help lenders provide loans that borrowers can repay successfully. Following the guidance and practices — and assessing each borrowers ability to repay—gives lenders additional legal protection. The Qualified Mortgage guidelines provide predictable and more-easily-understood loan features. They also rule out some loan terms and practices. Qualified mortgages cannot be: Interest-only loans Loans with terms >30 years "Negative Amortization" loans (increasing principal over time) Most forms of "balloon" loans with large payment partway into the loan period. These consistent practices help lenders and regulators provide consumers with objective guidance about reasonable debt. If you are buying a home, ask about your Qualified Mortgage options.

When an eligible mortgage proceeds to close, lenders are required to deliver a Closing Disclosure form, at least 3 business days before loan consummation. This form details the actual transaction terms and costs to be committed at closing and consummation. The Closing Disclosure must be delivered in writing (digital or paper). The details of the disclosure are specified by Federal guidelines; only the details specified by the CFPB should be included. Should transaction terms or transaction costs change prior to loan consummation, an updated Closing Disclosure should be provided by the lender. This may change the loan consummation deadline in turn, requiring an additional 3-day waiting period, in some cases. Loan closing and loan consummation are not exactly the same thing; although they may occur at the same time in some US States, they are legally distinct. Loan Consummation: borrower becomes contractually obligated to the lender (but not necessarily the seller.) Closing: all parties have committed and signed the necessary documents. The 3-business-day period applies to the gap between delivery of the Closing Disclosure, and legal loan consummation. Lenders will have more information on the specific circumstances that apply to a given transaction in a given US State.