Mortgage transactions involve taxes, escrow funding and some pre-payments. These costs should be considered in mortgage decisions. They include: Escrow funding, which is frequently required. Escrow funding covers future annual charges such as property taxes, homeowners insurance and mortgage insurance. Recording fees, which government agencies charge for keeping records defining legal ownership. Transfer taxes, which may be levied by municipalities, counties and states for handling the transfer of ownership records. Prepayments, which can include: Homeowners insurance premiums Mortgage insurance (if required) Property taxes for some months, in advance Prepaid interest, for the period from closing to 1st mortgage payment. These costs can vary between Loan Estimate and Closing Disclosure. Ask your lender about the tolerance rules, or watch related videos here.

The mortgage Loan Estimate includes two lists of services involved in the loan process: services you CAN shop, and services you CANNOT shop. Borrowers are free to shop and compare the first list; they may have the lender provide these services, or another part. Borrowers MUST use the lender or listed provider for services on the other list. The CAN shop list might include the following: Pest Inspection Property-Line Survey Title-related services. These might be broken down further: Lenders title policy, protecting the lenders interest in the collateral (usually, the property.) Settlement agent fees, to cover the costs of facilitating the final transaction. Title Search, to document legal ownership of the property. Title Insurance Binder, which allows use of the title search results for a period of time. Fees from providers on the list provided by the lenders are restricted by the Loan Estimate figures; their fees cannot change by more than 10% between estimate and closing disclosure. Providers not on the list are not restricted by the Loan Estimate; the lender is not responsible for changes in their fees or variances from the estimate.

The mortgage Loan Estimate includes two lists of services involved in the loan process: services you CANNOT shop, and services you CAN shop. See the other video in this series on "can shop." The Cannot Shop list covers fees and costs for outside parties (not the lender themselves). This list may include: Tax status research on the property Tax monitoring on property-tax payments Appraisal, which gives the lender a reliable value for the property Credit Reporting on the borrower. Flood Risk fees Flood Zone Monitoring Fees for these services in the Loan Estimate and in the final Loan Disclosure must match. There is ZERO tolerance for change on these items under lender compliance regulations.

This video explains the Loan Costs section of the mortgage Loan Estimate form. Key terms for which figures are provided include: Closing Costs: the set of fees involved in transferring title of the property to the buyer. Origination Charges: fees the lender collects for the mortgage process. These may include fees for handling the application itself, as well as "Origination Fees" — paid by the lender to a party that originates your loan, such as a mortgage broker. Points: essentially, a form of prepaid interest. Points are paid at time of the loan to lower the interest rate of the loan. Points may be tax deductible. Underwriting: fees charged by the lender to evaluate loan risks, based on the transaction and the borrowers financial attributes. The Loan Costs section is usually found on Page 2 of the Loan Estimate.

Lenders provide a Loan Estimate form within 3 business days of application for an approved loan. This form documents the terms, projected payment, costs and other details. These definitions may be helpful in interpretation: Loan Amount: total dollars borrowed, which is not the same as total borrowing cost. Interest Rate: cost you will pay each year to borrow, converted to a percentage rate. Not quite the same thing as: APR (Annual Percentage Rate): this includes interest rate, points (if used), mortgage broker fees, and other charges you pay to get the loan. Monthly Principal & Interest: payment amounts that go to reducing loan principal, and to paying interest, each month. (Mortgage insurance and escrow payments are not included here.) Projected Payments: approximate payment amounts over the years, with the major components such as principal, interest, mortgage insurance, escrow and assessment broken out. Estimated Closing Costs: specific costs to close, detailed. These are directly loan-related costs. Estimated Cash to Close: sum of estimate, plus any other known costs, to provide the total cash needed at loan close.

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.

Final mortgage costs may differ from the loan estimate, but the differences are defined by legal tolerances for some cost categories. For items limited to 10% change tolerance — recording-services charges and non-shoppable 3rd-party services — amounts paid over the Loan Estimate for these categories must be refunded. For all other items, including the services which a borrower is allowed to shop, differences between payment and closing, and Loan Estimate, are not refundable. The lender must arrange refunds within 60 calendar days (NOT business days) of loan consummation.

Lenders supply a Loan Estimate form for valid mortgage applications. This form documents these essential elements of the approved loan: Services borrowers CAN shop in relation to the loan Services borrowers CANNOT shop Loan terms Loan costs Project payments Cash and costs required to close the loan A loan summary to aid comparing this estimate to other estimates. Loan Estimate forms also provide details about loan assumption policies, appraisal, insurance, late-payment policies, and refinancing. The Estimate should also disclose whether the lender intends to service the loan directly. All Loan Estimates are not identical. Information that is NOT related to a specific application may be excluded. Careful reading and comparison is always a good practice.

By law, a mortgage loan application is valid when these things are provided to the lender: Loan Amount applied for Estimated Property Value Property Address Borrower Name Borrower ID — preferably Social Security Number Borrow Income Supplying these establishes a legitimate loan application under the Federal TRID guidelines. While submitting these in written form is preferable, providing them in conversation — live, phone call, or video conference — is also valid. You should request a written record of the conversation, of course. Once supplied, these 6 facts start the clock for a lender. Under the TRID guidelines, financial institutions must return a Loan Estimate within 3 business days. (See other videos on Loan Estimate details here.)

Laws set under the TILA- RESPA Integrated Disclosure Act - TRID - specify the details that lenders MUST supply to customers making an application for a real estate loan. Since Oct 1, 2015 loan providers are required to return two disclosures - the Loan Estimate and the Closing Disclosure. The Loan Estimate is, as the title suggests, an estimate that covers the key costs, risks and features of the proposed loan. When the lender approves a loan, the Loan Estimate must be returned to the consumer in three business days. (See related Video-Genius video on how business days are defined.) The Closing Disclosure applies if the loan process moves forward. This form covers the key costs of the loan transaction. It must be provide to the borrower a minimum of 3 business days prior to the final loan consummation.