Homeowner Headquarters

How to's and money-saving tips from resident homeowner and mortgage professional, Cathy West

The loan estimate form is an important part of the mortgage process.

The loan estimate and its role in securing the right mortgage

A key step on the journey toward homeownership is finding the mortgage that works for you. The loan estimate form is a vital tool that allows you to understand the loan a lender is offering you, and compare that loan with offers from other lenders. 

The loan estimate form
In October of 2015, the Consumer Financial Protection Bureau introduced a series of updates to the guidelines financial institutions must follow during the mortgage process. These changes were called the "Know Before You Owe" mortgage rule. One product of these updates was the introduction of the loan estimate form. The loan estimate form is a universal document all lenders must provide to you within three days of your application for a home loan.

The loan estimate consists of three pages that explain a potential loan offer from a lender. Some of the information within the estimate might be hard to understand. Luckily, the CFPB created the Loan Estimate Explainer, an interactive tool you can use to understand and the loan estimate form.

The website guides you through each specific section and provides tips for interpreting the information. For instance, they recommend you double-check that the rates and numbers on your estimate reflect the discussion you had with your lender prior to receiving the form and that you make sure the taxes on your property are calculated correctly. 

You should remember that a loan estimate form is not the final agreement between you and your lender. Some of the costs may change. What can change is dependent on a number of different variables. The CFPB provides a detailed list of what can change on your estimate, how much it can change by, and whether or not you are entitled to a refund.

Finding the best mortgage
The loan estimate form allows you to compare estimates from different lenders and decide which is best for you. The CFPB gestures to some key aspects of the loan estimate you should pay attention to when comparing different loans, such as cash needed at closing and lender credits. 

Page three of the loan estimate features a comparison section. This section gives you information that predicts where you will stand on your loan in five years, your annual percentage rate, and your total interest percentage. These numbers provide insights into how much the loan will cost you, and you should pay close attention to them when you look at your different loan estimates. 

Finding the best mortgage takes prudence and patience, but it shouldn't be difficult. The loan estimate form helps simplify securing a mortgage that works for you. For any questions about the loan estimate form or another aspect of the mortgage process, please reach out to CapWest Mortgage.

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