Understanding Disclosures

Two Primary Documents

As a borrower, you’ll quickly understand the back and forth communication and constant exchange of documentation with your lender during the home buying process. That said, there are two documents that you should specifically keep your eye out for: the Loan Estimate and the Closing Disclosure.

1. Loan Estimate

The first mandated document the borrower will receive from the lender in the mortgage loan application process is called a loan estimate. This document is a valuable source of information that will disclose fees and costs associated with your mortgage including: projected monthly mortgage payment, taxes, insurance, expenses, and estimated closing costs.

Additionally, The loan estimate also offers projections that can help you compare loan offers from multiple lenders, including total costs of third-party services, the annual percentage rate, and the amount of interest you’ll pay over the loan term, expressed as a percentage of your total loan amount.

2. Closing Disclosure

After you’ve gone through the extensive underwriting process with your lender and all conditions are met, you will receive the closing disclosure – which is essentially the same format as the loan estimate, but in final, “locked-in” form (adjusted based on daily rate changes and final financial scenario). Similar to the loan estimate, this will show the borrower the monthly payment, fees, and closing costs. It is very important to note that the borrower will receive the closing disclosure at least three days before your scheduled closing in order to review final terms and costs.