Loan Estimate Disclosures Quiz

Application Disclosures

• Application triggers disclosure requirements, fulfilled by the MLO, processor, or other staff, per lender practices.
• Loan Estimate (LE) disclosure is triggered by RESPA and lender receipt of six pieces of information: borrower's name, gross monthly income, Social Security number, property address, property value estimate, and loan amount.
• Disclosures are required within 3 business days of application. Business days exclude Sundays and legal holidays; Saturdays may or may not be considered business days.
• LE (detailed in TRID section 1) must include: interest rate, MLO's offered rates/prices/programs, loan terms (e.g., 30-year fixed), interest rates and discount points or lender credit combinations, and loan programs (ARM, fixed, FHA, Conventional).
• Par Rate: interest rate without discount points or lender credits.
• Discount Points/Buydown Points: borrower-paid to reduce interest rate.
• Lender Credit/Premium/Over-par pricing: credited to the borrower for accepting a higher interest rate.
• Temporary Buydowns: fixed-rate programs offering lower payments initially (e.g., 2-1 buydown).
• Loan rates can be locked (fixed) or floating (adjustable).
• Rate Lock/Lock-in: prevents interest rate changes between initial offer and closing, within stipulated timeframe and conditions.
• Floating Rate: interest rate can change due to market conditions until locked or closing date.
• Loan lock-in term affects pricing. Lock-in term: number of days between lock date and closing date.
• LE expires in 10 business days if borrower doesn't proceed; lender can offer revised terms.
• Monthly payments calculated by software based on interest rate and loan amount.
• Requires amortization software, financial calculator, or online tool for monthly payment calculations (for mortgage loans).
• LE delivery: at least 7 business days before consummation.
• Not applicable for reverse mortgages (Good Faith Estimate instead).

Loan Costs

• Loan Estimate includes detailed cost information.
• Mortgage Insurance (PMI): cost based on Loan-to-Value ratio (LTV), credit score, loan term, or program; quoted when commitment issued.
• PMI typically includes; initial; first renewal, and second renewal premiums (applied to the unpaid principal balance).
• Lender Paid Mortgage Insurance (LPMI): a percentage of the loan amount (e.g., 2.225% premium on $175,000 loan).
• FHA MIP: consistent and based on term and down payment.
• VA Funding Fees: vary according to veteran's service, status, and prior use of program.
• USDA Guarantee Fee: consistent, known upfront.
• Credit report, tax service, flood certification costs.
• Title insurance: one-time cost at closing, determined by loan amount (e.g., 4per4 per 4per1,000 in loan amount). Could include endorsements for additional coverage.
• Owner's title insurance is optional.
• Settlement fee, appraisal cost, inspection fee, recording fees, transfer tax.

Lender Fees

• Lender flat fees: underwriting, processing, administration fees.
• Loan origination fee: may be a percentage or flat fee.
• Discount points or lender credit cost: one point = 1% of loan amount (calculated similarly to discount points).
• Lender credits can be flat amounts (e.g. $1,000 toward closing costs).
• Temporary buydown cost varies by period.

Temporary Buydowns

• Temporary buydown cost = total subsidy amount (difference between payments at different rates) across the buydown period.

Prepaid Expenses

• Expenses collected at closing before due date, based on contract; sales concessions, tax and other cost prorations.

Escrow Deposits

• Collected at closing to pay borrower taxes, insurance, and mortgage insurance when due.
• Property Taxes: typically at least two months' collection.
• Estimated insurance costs: usually two months' coverage.
• Property/Flood/Mortgage insurance amount.

Per Diem Interest

• Interest paid in arrears; lender collects interest to the end of the closing month.
• Calculation: days remaining in month after funding date; multiply loan amount x interest rate = annual interest; annual interest / 365 (or 360) = daily interest; daily interest x number of remaining days.

Other Disclosures

• Mortgage Loan Servicing Disclosure

• CFPB Home Loan Toolkit

• Settlement Service Providers List

• Notice of Applicant's Right to Receive a Copy of the Appraisal

• Affiliated Business Arrangement Disclosure; if lender has ownership interest.

• Adjustable Rate Program Disclosure (if ARM), CHARM booklet

• Homeownership Counseling Disclosure

• Disclosures can be delivered electronically, in person, or via standard mail.