What is a Loan Estimate?
Recently, a client asked me the following question:
“It has been years since I took out a mortgage. I notice that instead of the old Good Faith Estimate, I am getting a Loan Estimate. What is a Loan Estimate? Are they the same thing?”
When It’s Out of Your Comfort Zone, Seek Help
I am comfortable and qualified to questions concerning life, disability, home, flood, renters, auto, co-op, and condominium insurance. I don’t possess the same knowledge levels about mortgages. So, I reached out to three of the top home mortgage lenders I know for their insights about the new Loan Estimate form.
Somehow, I know this will cost me big time down the road.
My Panel of Experts Answer The Question of “What Is A Loan Estimate?”
Ennell Esperance, a Senior Home Lending Advisor (NMLS ID: 68006) with the Home Lending Division of JPMorgan Chase Bank, provided me with some recent history about this topic.
In 2015, the Consumer Financial Protection Bureau, a government agency that regulates consumer financial instruments such as mortgages, retired the Good Faith Estimate form (in part) and created the Loan Estimate form.
On the Good Faith Estimate form, lenders used their own language to describe the loans. Multiple estimates could seem very different. Consumers were confused by that document.
How Does The Loan Estimate Work?
The new Loan Estimate consolidates four forms into two: the Loan Estimate and the Closing Disclosure.
The new Loan Estimate is a three-page form that you receive within three business days after you apply. It is not a loan approval or rejection. It simply gives you loan terms, projected payments, and closing costs for review.
Standardized Wording in The Loan Estimate
Leon T. Gelzer, Sr., (NMLS ID: 41256), is a Santander Bank Community Reinvestment Act (CRA) officer and Community Mortgage Development Loan Officer. He described how the Loan Estimate standardizes the wording that lenders can use. You’ll see which costs are fixed and which are not, allowing you to shop lenders.
Leon went on to say it also prevents surprise fees by establishing tolerance levels. If you do take the loan and the fee amount estimated is more than the amount paid, the lender makes up the difference.
I would imagine every mortgage lender does their best to avoid this reality.
How Loan Estimate Costs Are Broken Down
Peter Chace, a Mortgage Loan Officer (NMLS ID: 206181), with TD Bank directed me to the Consumer Finance Protection Bureau’s website to view samples of the Loan Costs and Closing Disclosure forms (Click Here to go to the CFPB website) and highlighted how costs are also broken down in the following categories:
- Loan Costs (origination charges, services you can’t shop for and services you can shop for) and Other Costs (taxes, government recording fees, pre-paid fees, and initial escrow payments, for example).
- Closing Disclosure
The Closing Disclosure is a five-page form that buyers receive before closing. It has the final terms and costs associated with the mortgage and specifies the amount of money you need on-hand at closing. Buyers can easily compare the Loan Estimate to the Closing Disclosure. Buyers will have three (3) days to review the form and ask questions.
I want to thank these gentlemen for being so generous in sharing their time with me, and ultimately, you.
Let’s Thank Our Experts
Here is the contact information you’ll need to reach of our experts who contributed:
Ennell Esperance can be reached by telephone at
718-810-7680, and by email at [email protected];
Leon T. Gelzer, Sr.’s office number is 718-302-5418. Leon’s email address is [email protected].
Peter Chace can be reached by telephone at 917-715-2818. Peter’s email address is [email protected].
You can also find a copy of the full Loan Estimator, with completed samples in English and Spanish at https://www.consumerfinance.gov/policy-compliance/guidance/mortgage-resources/tila-respa-integrated-disclosures/forms-samples/
Eustace L. Greaves, Jr., LUTCF is an NYS-licensed Independent Insurance Agent and Broker with over 38 years of experience. Eustace is ready to assist you with your life, disability, home, flood, renters, auto, cooperative and condominium, and wedding insurance needs, and can be reached at 718-783-2722, or by email at [email protected]. You can also contact him by going to https://greavesinsurance.com and completing any of the available “Contact Us” forms.
If you’d like to subscribe to his monthly newsletter, “Health, Safety, and Good News You Can Use,” just to his website, https://greavesinsurance.com, and click on any of the “Subscribe” buttons.
Have insurance, income tax, real estate, mortgage, or home inspection questions for Eustace? He’ll be happy to provide the insurance and income tax answers and will continue to call on his expert contacts for help in the other areas. Just send him an email to [email protected] with the subject line, “Ask Eustace.”
