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Loan Estimate Review

What is a Loan Estimate?

The Loan Estimate is the official CFPB Document required to be sent to the borrower within 3 business days of receiving an official Mortgage Application by definition under TRID – Regulation Details.

Walking through the Loan Estimate with your customer (either when we generate one for them in the initial disclosures or if they have a Loan Estimate from another lender to compare) is a valuable sales conversation and will help your customer understand the differences in pricing. The better you understand how to talk through the Loan Estimate, the better you will be at explaining all aspects of the loan pricing.

Sample Loan Estimate

Below is a sample of a Loan Estimate from the CFPB website.Page 1: Loan Terms, Projected Payments, Closing Costs

Page 1: Loan terms, projected payments, closing costs

Page 2: Breakdown of Closing CostsPage

Page 3: Additional Information

LE Walkthrough (example) 

See below for some example scripts on walking your customer through the Loan Estimate.

Section A – Origination Charges

This section will show the % and dollar amount of Discount Points associated with the interest rate. If the loan does not have points, the line item will show up but the percentage and dollar amounts will be blank. If there are Lender Credits associated with the interest rate selected, they will show up under section J Total Closing Costs. 

Section B – Services you can’t shop for

This section outlines the fees that are standard for any mortgage. For example, the appraisal fee or Flood Services & Tax Services.  They are “not shoppable” by the consumer because the report/ service provided relies upon a qualified third party to complete. These fees are fairly standardized across the industry. 

Section C – Services you can shop for

This section represents the estimated fees a client will be charged for the services provided and performed by a title company. The fees listed are an estimate and provided by a National Title Company: First American Title. The client still has an option to shop around for the lowest cost.

Section E – Taxes & Other Government Fees

This section outlines the standard fees associated with the process of recording the transaction and transfer of ownership within the public records monitored and maintained by the state, county and local municipality. In addition to recording fees, it also includes the transfer tax fees. In Berkeley, there is a 1.5% transfer tax fee and per the contract, it is split 50/50 by buyer and seller.

Section F – Prepaids

For Purchase transactions, the prepaid amount for HOI is always the first year (12 Months). The amount listed is simply an estimate and the client can shop around for the best provider. The amount collected at closing can increase or decrease depending on the policy they choose.

Under prepaids, the lender also includes prepaid interest and is calculated as the cost of interest from the closing date to the end of the month

Section G – Initial Escrow Payment at Closing

This section outlines estimated amounts that will be collected at closing to pre-fund the escrow account used to make payments on the client’s behalf during the life of the loan. These numbers will be adjusted as additional information is provided by the title company and the insurance agent.

Section H – Other

Includes the cost of an Owner’s Title Policy which is optional. Additional fees such as a broker fee will often be added under this section prior to closing.

Additional Resources

The CFPB website is a good resource to share with your customers if they are having trouble reading through and understanding their LE. You can also reach out to our team if you have questions you need help answering. 

We also have a great resource on Initial Disclosures you can share with your customer. There are links in here that walk them through the Loan Estimate