What is the NEW LOAN ESTIMATE (LE)?
The New Loan Estimate (LE) replaces the Good Faith Estimate (GFE) and the initial Truth In Lending document (TIL). The LE provides borrowers with clearer information on loan terms and estimates of loan and closing costs. This will facilitate comparison shopping. It will be provided to all borrowers within 3 business days, after they have submitted their loan applications.
What is the ANNUAL PERCENTAGE RATE?
The Annual Percentage Rate, or A.P.R., is the cost of your credit expressed in terms of an annual rate. Because you may be paying "points" and other closing costs, the A.P.R. can be compared to other loans for which you may have applied and give you a fair method of comparing price.
What is the AMOUNT FINANCED?
The amount financed is the mortgage amount applied for MINUS prepaid finance charges and any required deposit balance. Prepaid finance charges include items such as loan origination fees, commitment or replacement fee (points), adjusted interest, and initial mortgage insurance premium. The Amount Financed represents a NET figure used to allow you to accurately assess the amount of credit actually provided.
Does this mean I will get a lower mortgage than I applied for?
No, if your loan is approved for the amount you applied for, that is how much will be credited toward your home purchase or refinance at settlement.
What is the ANNUAL PERCENTAGE RATE different from the interest rate for which I applied? Why is the AMOUNT FINANCED different?
The Amount Financed is lower than the amount you applied for because it represents a NET figure. If someone applied for a mortgage of $50,000 and their prepaid finance charges total $2,000, the amount financed would be shown as $48,000, or $50,000 minus $2,000. The A.P.R. is computed from this LOWER figure, based on what your proposed payments would be. In a $50,000 loan with $2,000 in prepaid finance charges, and an interest rate of 14%, the payments would be $592.44 (principal and interest) on a loan with a thirty year loan term. Since the A.P.R. is based on the NET amount financed, rather than on the actual mortgage amount, and since the payment amount remains the same, the A.P.R. is higher than the interest rate. It would be 14.62%. If this applicants loan were approved he would still receive a $50,000 loan for thirty years with monthly payments @ 14% or $592.44
How will my payments be affected by the Disclosure Statement?
The Disclosure Statement only discloses your estimated payments. The interest rate determines what your monthly principal and interest payment will be.
What is the FINANCE CHARGE?
The Finance Charge is the cost of credit. It is the total amount of interest calculated at the interest rate over the life of the loan, plus prepaid finance charges and the total amount of mortgage insurance charged over the life of the loan. This figure is ESTIMATED on the Disclosure Statement and is estimated in any adjustable rate transaction.
What is the TOTAL OF PAYMENTS?
This figure indicates the total amount you will have paid, including principal, interest, prepaid finance charges, and mortgage insurance if you make the minimum required payments for the entire term of the loan. This figure is ESTIMATED on the Disclosure Statement and is estimated in any adjustable rate transaction.
My statement says that if I pay the loan off early, I will not be entitled to a refund of part of the finance charge. What does this mean?
This means that you will be charged interest for the period of time in which you used the money loaned to you. Your PREPAID finance charges are not refundable. Neither is any interest which has already been paid. If you pay the loan off early, you should not have to pay the full amount of the "finance charges" shown on the disclosure. This charge represents an estimate of the full amount the loan would cost you if the minimum required payments were made each month through the life of the loan.
Why must I sign the Disclosure Statement?
Lenders are required by law to provide the information on this statement to you in a timely manner. Your signature merely indicates that you have received this information, and does not obligate either you or the lender in any way.
What is the difference between a pre-qualification and a pre-approval?
A pre-qualification shows you what you can afford and a pre-approval is confirming with bank statements, pay stubs and credit reports what you have provided verbally for the sake of achieving a full loan approval.
Is it okay to use on-line bank statements?
Only if the statements have the bank logo, name and correctly reflect your account number.
What is meant when locking my interest rate and when do I lock?
It means that a commitment has been made between my company and the investor on your behalf regarding the interest rate in your mortgage loan. Your loan officer watches the market on a daily basis to make sure that when we lock your interest rate, it is in the best interest for you and your loan.
How do rates move?
Rates can move more than daily, but on a typical day rates do not move very much. This is why it is important to work with one of our experienced Loan Originators at Lake Tahoe Mortgage to assist you in making the determination of when to lock your loan. Things that will affect the interest rate moving are strong swings in the equity or stock market and indications from our economic position in not only the U.S. market but the world market as well.
Do you sell my loans?
That depends on the wholesale lender selected for your loan. Some lenders keep and service the loan. Others may transfer the loan to another company for servicing your monthly payments and escrow impound account activities after the loan closes. Lake Tahoe Mortgage will provide all the information about your lender/investor.
What is a target rate?
Your target rate is the rate we will discuss to be the original optimal rate of interest for your mortgage.
Am I committed to you because I have signed or reviewed my loan application?
No. We would love for you to do business with Lake Tahoe Mortgage and if there are any problems, please consult with your loan officer or our Broker - Steve Bennett. The only commitment you have is when you have completed the signatures on the loan closing documentation and the loan funds have been disbursed.
What are my origination and discount points?
These are percentages of the loan amount that you and your loan officer discuss regarding your rate and total cost of originating your mortgage loan. Final numbers are disclosed clearly on the Loan Estimate.
Where will I be closing, how much do I bring to close and can I bring a personal check?
The contract will specify where you will be closing. 3-5 days prior to closing Fairway will contact you regarding how much to bring and to bring it in the form of a cashiers check made payable to the title company. You can have a check of up to $1000.00 for any difference in the amount you are told and the actual amount needed.
How will I be updated on my loan?
Your Loan Officer will be in contact you during the completion of your application and we will contact you after the application has been submitted to the lender of choice. Once your loan is conditionally approved and the appraisal is in, we will contact you regarding any pertinent follow up information. Finally you will be contacted 7-10 days prior to closing for confirmation of details and 3-5 days before closing to go over final figures.
What are Closing Costs?
Closing costs are those costs that include the loan origination fee, discount points, appraisal costs, and any other charges associated with the legal transfer of property. Typically, these costs will range between 2% and 3% of the mortgage amount.
What is Private Mortgage Insurance (PMI)?
Private mortgage insurance is required on conventional loans and may allow you to purchase a home for as little as 5% down. This coverage requires a monthly insurance fee to be paid. PMI is only required if your loan-to-value is above 80%.
How long do I have to rescind? When does the right of rescission start?
The right of rescission refers to the right of a consumer to cancel certain types of loans. If you are buying a home with a mortgage, you do not have a right to cancel the loan once the closing documents are signed.
If you are refinancing a mortgage, you have until midnight of the third business day after the transaction to rescind (cancel) the mortgage contract. The three-day clock does not start until all three of the following events have happened:
- You sign the credit contract (usually known as the Promissory Note)
- You receive a Truth in Lending disclosure (in most circumstances, this will be your Closing Disclosure form)
- You receive two copies of a notice explaining your right to rescind
The first business day after the last of these events counts as day one. For rescission purposes, business days include Saturdays, but not Sundays or legal public holidays. For example, if the last of the above three events occurs on a Friday, and there are no legal public holidays in between, then you have until midnight on the following Tuesday to rescind.
You may use the form provided to you by the lender or write a letter. Whatever form of written notice you use, make sure it is mailed or delivered before midnight of the third business day. Keep a copy and any evidence that it was mailed or delivered on time.