When obtaining a home loan, you’ll receive two important documents from your lender: a loan estimate and a closing disclosure. On the surface, these documents are very similar, but they both serve different purposes.
Here’s what you need to know about the differences between these two forms and what each means for you:
When you receive both the loan estimate and closing disclosure, double-check all information to ensure its accuracy:
If any part of the information presented needs to be corrected, contact your lender to get it corrected as soon as possible. Incorrect information can delay your closing and result in a less-than-favorable mortgage outcome.
A loan estimate is a form you receive after you have found a property and applied for a home loan.. This document contains all of the costs associated with your loan. This is also known as a good faith estimate (GFE).
You should receive your loan estimate within three business days of when the loan is disclosed. Review this document to understand the fees and question any high costs.
Your closing disclosure provides you with the same information as your loan estimate but finalized. The costs have been locked in, and it will show the exact amount you will need to pay at closing.
Compare the numbers on your closing disclosure to your loan estimate. Note that the costs may or may not have changed. If they have, ask your lender about them. Sometimes, your final closing costs may be lower than the estimated amount. This can be due to credits from the seller or lender and shopping around for services whose costs you can control, like your home inspection.
You will not receive a closing disclosure if you apply for a reverse mortgage.
Upon receiving and reviewing your loan estimate and closing disclosure, you are still not obligated to go through with the loan with that specific lender. And signing the forms doesn’t mean that you accept the loan–it simply means that you have received them.
If the costs differ from what you expected or are too high, you can shop for another lender. Just remember that this can cause your home’s closing to be delayed, and there is no guarantee that another lender will offer you a better deal.
The above information is for educational purposes only. All information, loan programs and interest rates are subject to change without notice. All loans subject to underwriter approval. Terms and conditions apply. Always consult an accountant or tax advisor for full eligibility requirements on tax deduction.
If you plan on purchasing a home, you will likely take out a home mortgage. Since your monthly mortgage payment is a combination of four charges bundled into one, it’s essential to understand each element of your overall payment and how it can fluctuate over time. Using the acronym P.I.T.I. can help you remember.
DTI ratio, or debt-to-income ratio, is the amount of debt you pay off each month in relation to your gross monthly income. This number lets your lender know how much of your overall income will be available to cover your mortgage and is represented as a percentage. For example, if 50% of your income goes […]
Whether it’s your first home or your second, buying a home is an exciting adventure, and getting lost in the moment can be easy. But take a step back and ask yourself: How much house can I realistically afford?
