The Loan Estimate is designed to provide information to help borrowers understand the key features, costs, and risks of the mortgage loan for which they are applying. Generally, the Loan Estimate requires the disclosure of categories of information that will vary due to the type of loan, the payment schedule of the loan, the fees charged, the terms of the transaction, and state law provisions. The Loan Estimate must be provided to borrowers no later than three business days after they submit a loan application. The format of the Loan Estimate and the required content and disclosures are described in Reg. Z, 12 CFR §1026.37The Loan Estimate must be used for most closed-end mortgages. Home equity lines of credit, reverse mortgages, or mortgages secured by a mobile home or by a dwelling that is not attached to real property (i.e., land) must continue to use current disclosure forms required by TILA and RESPA separately. Any transaction that is a federally related mortgage loan under Regulation X, 12 CFR 1024.2, must be made using the standard Loan Estimate Form (H-24). Adjustment to the Monthly Principal and Interest. The lender would also disclose the scheduled frequency of adjustments, due date of the first adjustment, and the maximum possible amount (and the earliest date it can occur) of the Monthly Principal and Interest. In addition, if there is a period during which only interest is required to be paid, also disclose that fact and the due date of the last periodic payment of such period. The date disclosed is the year in which the event occurs, counting from the due date of the initial payment. Also, disclose and reference the Adjustable For an adjustment in Loan Amount, the lender must Payment (AP) Table on Page 2.When the Loan Amount, Interest Rate, or Monthly Principal and Interest payment CANNOT increase after consummation, state 'No' where applicable. Homeowner's Insurance is any insurance against loss or damage, or against liability arising out of the property. The insurance premiums included as Estimated Taxes, Insurance & Assessments are for credit life, accident, health, or loss-of-income insurance; insurance against loss of or damage to property, or against liability arising out of the ownership or use of property; and debt cancellation or debt suspension coverage.
To calculate the amount of property taxes, homeowner's insurance, and other insurance premiums, use the taxable assessed value of the real property securing the transaction after consummation, including the value of any improvements or construction, to the extent known, and the replacement costs of the property over the first year.
Other Costs include taxes, governmental recording fees, and certain other payments involved in the real estate closing process. Other Costs are established by government action, determined by standard calculations applied to ongoing fixed costs, or based on an obligation incurred by the borrower independently of any requirement imposed by the lender. Other items that are required to be paid at or before closing pursuant to the contract for sale between the borrower and a seller are disclosed on the Loan Estimate to the extent the lender has knowledge of those items when it issues the Loan Estimate.
Other Costs must be disclosed in the order listed in the regulation, with any additional items listed in alphabetical order in subsequent lines of the applicable subheading.
An addendum to the Loan Estimate cannot be used for additional items on the Other Costs Table. If all the charges cannot be itemized in the number of lines provided in a subheading of the Other Costs Table, the total of those items that exceed the number permitted are disclosed with the label "Additional Charges" on the last line of that subheadingDisclose Other Costs under four subheadings, each of which is subtotaled: Taxes and Other Government Fees, Prepaids, Initial Escrow Payment at Closing, and Other. Total Other Costs is the sum of these four subtotals.
Under the Taxes and Other Government Fees subheading, disclose Recording Fees and Other Taxes first and Transfer Taxes second.
Recording Fees and Other Taxes are fees assessed by a government authority to record and index the loan and title documents as required under State or local law, together with any charges or fees imposed by a State or local government that are not Transfer Taxes. Recording Fees and Other Taxes do not include fees that are based on the Sale Price of the Property or Loan Amount.
Example: A fee for recording a subordination that is $20, plus $3 for each page over three pages is included as Recording Fees and Other Taxes; but a fee of $1,250 based on 0.5% of the Loan Amount is included as Transfer Taxes, and not included as Recording Fees and Other Taxes.
Transfer Taxes are State and local government fees on mortgages and home sales that are based on the Loan Amount or Sale Price of the Property. The name that is used under State or local law to refer to these amounts is not determinative of whether or not they are disclosed as Transfer Taxes on the Loan Estimate.Disclose only Transfer Taxes paid by the borrower on the Loan Estimate. Whether the borrower pays the transfer tax is based on applicable State or local law.
Example: If a State law indicates a lien can attach to the borrower's acquired property if the charge is not paid, the amount is included as part of Transfer Taxes;
If State or local law is unclear or does not specifically attribute the amount to the seller or borrower, disclose the amount apportioned to the borrower using common practice in the locality of the property.
However, transfer taxes to be paid by the seller are not disclosed on the Loan Estimate as Transfer Taxes.
The amount of Transfer Taxes disclosed could be modified to the extent the lender has knowledge of the apportionment of transfer taxes in the contract for sale between the borrower and a seller when it issues the Loan Estimate. When a lender does not have the contract of sale when it issues the Loan Estimate, the lender must use the apportionment of transfer taxes provided for by State or local law, or common practice when State or local law is unclear.
Disclose the sum of all transfer taxes paid by the borrower as Transfer Taxes. No additional items may be listed or deleted in the Taxes and Other Government Fees category.
Estimated Closing Costs Financed is the sum of Loan Amount and Payoffs and Payments, but only to the extent, the amount is greater than zero and less than or equal to the sum of Total Closing Costs.
If the Loan Amount is $100,000, the Payoffs and Payments is -$80,000, and the Total Closing Costs is $10,000; then the Closing Costs Financed would be $10,000.
If the Loan Amount is $100,000, the Payoff and Payments is -$95,000, and the Total Closing Costs is $10,000; then the Closing Costs Financed would be $5,000.
If the Loan Amount is $100,000, the Payoffs and Payments is -$110,000 and the Total Closing Costs is $10,000; then the Closing Costs Financed would be $0.
The Loan Estimate is designed to provide information to help borrowers understand the key features, costs, and risks of the mortgage loan for which they are applying. The Loan Estimate must be provided to borrowers no later than 3 business days after they submit a loan application. The Loan Estimate must be used for most closed-end mortgages. Home equity lines of credit, reverse mortgages, or mortgages secured by a mobile home or by a dwelling that is not attached to real property (i.e., land) must continue to use current disclosure forms required by TILA and RESPA separately.
When a lender or mortgage loan originator receives a loan application, the borrower must receive a Loan Estimate no later than 3 business days of the receipt of the application.
There are six items required for an application to be considered received: borrower's name, borrower's income, borrower's social security number to obtain a credit report, address of the property, estimate of the value of the property, and the mortgage loan amount sought.