How many business days after you submit your application will you receive a loan estimate form? 3 Days? 5 Days? 2 Weeks? I advice you read on to find out.
In the united states and in almost all countries of the world, if you want to start a business, there are certain structures put in place to ensure that you access loans or credit that can help you kick start your business or re-capitalize your business for expansion. To start the process of accessing a loan facility, you must apply to get a loan estimate.
What is a Loan Estimate Form?
A Loan Estimate is a three-paged form that you receive after applying for a loan. In the United States, the Loan Estimate is a document that took effect on Oct. 3, 2015.
The form provides you with important information, including the estimated interest rate, monthly payment, and total closing costs for the loan. The Loan Estimate also gives you information about the estimated costs of taxes and insurance, and how the interest rate and payments may change in the future.
In addition, the form indicates if the loan has special features that you will want to be aware of, like penalties for paying off the loan early (a prepayment penalty) or increases to the mortgage loan balance even if payments are made on time (negative amortization). If your loan has a negative amortization feature, it appears in the description of the loan product.
The form uses clear language and design to help you better understand the terms of the mortgage loan you’ve applied for. All lenders are required to use the same standard Loan Estimate form. This makes it easier for you to compare loans so that you can choose the one that is right for you.
Please note that receiving a Loan Estimate does not mean that the lender has approved or denied your loan application. The Loan Estimate is a detailed document that helps you understand the loan terms the lender expects to offer if you decide to go ahead with the application.
Please note that if you are still interested after receiving and perhaps reviewing the Loan Estimate, the lender will request for additional financial information from you before going ahead to process your loan.
Once you are done with completing your loan application document, your loan advisor will then provide you with a variety of documents outlining the costs associated with your loan, such as the Loan Estimate form, which is required by law.
How Many Business Days After You Submit your Application Will You Receive a Loan Estimate Form?
Usually, within three business days of submitting your application, your loan advisor must provide you with a Loan Estimate. The Loan Estimate explains important details about the loan you have requested for and the lender is mandated to provide it within three business days of receiving your application.
Interestingly, you can use your Loan Estimate to compare rates and settlement charges from other lenders that you intend applying for loans from.
In case you are not used to the legal terminology used in the Loan Estimate document, then the following definitions should help you understand some of the most important information on the form;
- Loan Terms
This section defines the basic terms of your mortgage loan, including the initial loan amount, interest rate and initial monthly payment. This section also includes important information indicating if your interest rate can rise and if your loan has a prepayment penalty.
- Escrow Account Information
Most lenders require you to pay in advance for some items that will be due after closing. These prepaid items generally include homeowner’s insurance premiums and property taxes.
- Closing Cost Details
Your closing costs include Loan Costs and Other Costs. Loan costs are divided into three categories:
- Origination charges are fees charged by your lender for preparing and submitting your completed loan application and underwriting your loan. The Origination Charges can include an application fee, an underwriting fee and an origination charge or points.
- Services You Cannot Shop For, lists the fees for those settlement services for which the lender will select the person or entity that will provide those services. These services typically include appraisals and credit reports for example.
- Services You Can Shop For, lists the fees for those settlement services that you may shop for and choose the service provider. These services may include the company that issues title insurance, conducts a survey, or performs a pest inspection.
Other Costs include:
- Taxes and government fees such as recording fees and taxes and transfer taxes
- Prepaid such as homeowner’s insurance premiums for the first year of your loan term, prepaid interest and property taxes
- Initial escrow payments at closing, which generally include two months of homeowner’s insurance premiums and property taxes.
Aside from the above, the Common fees you may be charged include the following:
- Appraisal Fee
Appraisal fee is the fee paid to the professional appraiser who will assess the value of the home you want to buy.
- Credit Report Fee
Credit report fee is the cost of getting copies of your credit report to assess your mortgage loan application.
- Title Services Fee and Title Insurance
Title Services Fee and Title Insurance is the fee paid to a title company to search county records to make sure that the title to the property you wish to buy is clear and free of any complications like pending debts or liens on the property.
- Government Recording Charges
Government recording charges is the fee required to register the property under your name and record the mortgage or deed of trust.
- Initial Deposit for Your Escrow Account
Initial Deposit for Your Escrow Account represents the money that you are required to pay in advance to establish your escrow account.
It is important to state that the Loan Estimate is only an estimate, and the actual charges you must pay at closing may be slightly different from the Loan Estimate sent to you, that is why it is called Loan Estimate. The norm is that at your closing, you will receive a Closing Disclosure form that lists your actual loan costs.
It is advisable that you compare the charges on the Closing Disclosure with the charges on the Loan Estimate to ensure that they are within your expectation. If it is way beyond what you are expecting, you can call them up to give you further clarifications before going on with the process.