Lenders are legally required to provide borrowers with detailed information regarding loan terms so that customers can make informed decisions. When you apply for a mortgage, you will receive information on the projected costs associated with it. Right before you close on a new home, you’ll get another statement that covers the same details.
What Information Will a Lender Provide?
When you apply for a mortgage, the lender will be required to give you a loan estimate within three business days from the time when it receives your application. The lender will have to provide you with another form, a closing disclosure, at least three business days before you close on your new house.
The two forms will cover the mortgage interest rate, estimated monthly payment amount, closing costs, and other key information. The figures on the loan estimate are amounts that you are likely to pay, while the closing disclosure includes finalized numbers that reflect the actual amounts you will be required to pay.
Why Should You Compare the Two Forms?
It’s important to carefully compare the loan estimate and closing disclosure forms so you can identify any discrepancies before you agree to the terms and close on your new house. Go through the two forms, line by line. If you notice a significant discrepancy between the figures, contact the lender to find out the reason.
Why Might the Numbers Be Different?
The figures might not match up exactly, but they should be close to each other. The numbers might be different because the lender received additional information that changed the way it evaluated your application. It’s also possible that an event beyond the control of either you or the lender affected the loan terms.
There are some fees that a lender is not permitted to change. Some fees can only increase by a certain percentage, while in other instances, there is no limit to how much specific fees can rise. If you note a discrepancy related to a fee that the lender is not permitted to change, or if a jump is larger than the allowed amount, you might be entitled to a refund.
How Should You Handle a Discrepancy?
If you find a significant difference between the two forms, don’t sign the loan documents unless and until the issue has been resolved. If you can’t reach a resolution that you consider satisfactory, you can cancel the mortgage and find a different lender. That might delay closing, but it will keep you from paying extra money that you shouldn’t have to pay. If you sign the loan documents without resolving a discrepancy first, you’ll be bound to the terms of the agreement.
