Understanding Your Loan Estimate: Terms, Payments and Closing Costs

 

The first page of your Loan Disclosure shows the Loan Terms Projected Payments and Costs at Closing.

The Loan Amount, of course is the total you are borrowing. But the Interest Rate alone doesn’t represent all of your borrowing costs. The APR figure on Page 3 shows that.

Likewise, Monthly Principal & Interest aren’t the complete amount you will actually PAY each month.

The Projected Payments figures add other costs, such as Mortgage Insurance Estimated Escrow, Taxes, Insurances and Assessment to show the approximate amount you will pay each month, over time.

The Estimated Closing Costs are directly loan-related. while the Estimated Cash to Close adds other known closing costs to tell you the estimated cash you’ll need to have to close this loan.

Can My Settlement Charges Change?

 

Yes, if circumstances change, such as:

  • a natural disaster damages the property or affects closing costs
  • the title insurer providing the estimate goes out of business during underwriting
  • new information on you or the transaction affecting settlement is discovered.

If any of these events change 3rd-party charges beyond the 10% tolerance limit creditors may issue a revised Loan Estimate.

If a creditor issues a Loan Estimate they are presumed to have collected all 6 pieces of required information. They may not claim a change in circumstances by receiving one of these pieces of information AFTER issuing a Loan Estimate.

Can Creditors Revise TRID Loan Estimates?

 

Creditors are generally bound by the initial Loan Estimate. They are permitted to provide a revised Loan Estimate only under certain changed circumstances. These include circumstances that:

a) increase settlement charges beyond the legal tolerance limits

b) affect YOUR eligibility or change the value of the loan security.

Also,

c) if the interest rate was NOT locked and the new rate changes points or lender credits

d) for settlement delay on new construction loans within the stated revision window – typically 60 days, or

e) if YOU indicate an intent to proceed more than 10 business days after the Estimate or request loan term revisions.

Changed circumstances are extraordinary events beyond the control of you or the lending parties, OR changes or inaccuracies revealed in the information the lender used in preparing the Loan Estimate, OR new information on you or the transaction that the creditor did not use in the Loan Estimate.

What’s Refunded If My Loan Is Higher Than My Estimate?

 

If the amount you pay at closing exceeds the amounts disclosed on the Loan Estimate – beyond tolerance limits for each category – the creditor must REFUND the excess to you no later than 60 calendar days after loan consummation.

For charges subject to a 10% cumulative tolerance fees greater than 10% of the Loan Estimate for the same charges must be refunded.

For fees paid for 3rd party services which the creditor did NOT permit you to shop the FULL amount over the estimate must be refunded.

For charges subject to ZERO tolerance including fees paid to the creditor mortgage broker or their affiliates any amount beyond the Loan Estimate must be refunded.

Could My Loan Costs Exceed The Loan Estimate?

 

Yes, within defined limits.

Service charges for which YOU shop and select a provider may change; the creditor is NOT responsible for providers who are NOT on their written list.

In addition, prepaid interest, property insurance premiums and escrow or reserve deposits may change without legal tolerance limits.

Charges for recording services, and 3rd-party services ON the creditor list, grouped together may not exceed the Loan Estimate total for the same charges by more than 10%.

Transfer taxes, fees paid to the creditor, mortgage broker or an affiliate of either and fees paid to a 3rd party for services the creditor does NOT permit you to shop are ZERO tolerance and must match the Loan Estimate.

What Will The TRID Loan Estimate Tell Me?

 

The Loan Estimate documents the essential facts and terms of an approved real estate loan. It includes:

  • loan terms
  • projected payments and loan costs
  • cash and costs at closing time
  • the services for which you CAN and CANNOT shop in relation to the loan
  • summary information with which to compare this loan to others

and other important details such as appraisal, insurance, late payment, refinancing, loan assumption policy and whether this lender intends to service this loan.

The Loan Disclosure is a dynamic form; it will include information that IS related to YOUR loan and may leave out information that is NOT so forms from different lenders or for different loans may not look identical.

How Long Must Creditors Keep Real Estate Loan Records?

 

Under the TRID rule, creditors must retain Escrow Cancellation and Partial Payment Policy disclosures for two years; Loan Estimate records for three years after loan consummation and Closing Disclosures for FIVE years.

If a creditor sells or transfers their interest they must provide a copy of the Closing Disclosure to the new owner or servicer and both parties must retain it for the remainder of the 5-year period. Records CAN be stored digitally but it is NOT required.

TRID does not define how long consumers should keep disclosure records.

 

What Is A ‘Business Day’ For Real Estate Loan Disclosures?

 

“Business day” is defined slightly differently for Loan Estimates and Closing Disclosures.

For Loan Estimates, each day on which a creditor’s offices are open to the public count as a business day. Loan estimates must be delivered or placed in the mail no later than the 3rd business day after receiving your loan application.

For Closing Disclosures, a business day is defined as all calendar days except Sundays and the Federal public holidays The Closing Disclosure must be provided to you at least 3 business days PRIOR to loan consummation.

Do Creditors Have To Approve TRID Loans In 3 Days?

 

If your loan is approved, on the terms you requested the creditor is required to provide a Loan Estimate within 3 business days.

If they determine that your application will not or cannot be approved they do not have to provide a Loan Estimate.

Likewise, if you withdraw your loan application within that period they do not have to provide the Loan Estimate.

However, if the creditor does NOT supply the Loan Estimate in the required time approving and issuing the loan later under your original application terms will make them non-compliant with TRID Regulation Z.

Can Creditors Collect Information Beyond The 6 Required Pieces?

 

In addition to the required pieces:

  • Name
  • Income
  • Social Security Number
  • Property Address
  • Estimated Property Value
  • Mortgage Amount Sought

a creditor may collect whatever additional information they deem necessary.

However, as soon as you have provided the 6 required pieces, the creditor has 3 business days to provide a Loan Estimate for approved loans.