Tag Archives for " Closing Disclosure "

Know Before You Owe

loan estimate mortgage disclosure rules


In 2015, the Consumer Finance Protection Bureau (CFPB) created “Know Before You Owe” mortgage disclosure rules. These were implemented to ensure that consumers would have easy-to-understand information before making what is usually their largest financial decision – namely, the purchase of their own primary residence.

There were a bunch of disclosures required by the CFPB – with changes introduced every year. The key disclosures are the Loan Estimate (which replaced the old Good Faith Estimate), and the Closing Disclosure (which replaced the old HUD-1 Settlement Statement). A lender or mortgage broker is required to issue you a Loan Estimate within three (3) business days to a prospective borrower who is “in application”.

Borrowers refinancing or purchasing a residential property are deemed to be “in application” when the following six items have been received:

  1. Full Name
  2. Social Security Number
  3. Property Address (for a purchase, there should be a reasonable probability of going under contract)
  4. Estimated Value (for a purchase, what the offer is expected to be)
  5. Loan Amount (this item would not be considered received if the down payment is uncertain)
  6. Income (the borrower’s actual and projected earnings should be reasonably reliable)

This was a good rule, because consumers often never really knew what their loan costs and reserves would be until right before closing. Unscrupulous lenders and brokers had been “hooking” their borrowers – thereby making it difficult to change lenders right before funding.

Interestingly, these rules do not apply to commercial, reverse, mobile home or HELOC mortgages.

Here’s the Point: Get a Loan Estimate as soon as possible when applying for a mortgage – so that you know what your costs are likely to be.