Applying for a mortgage loan means many documents to review and sign. Two of them that you will receive, the loan estimate and the closing disclosure, are very similar and serves much of the same purpose: to show you the true cost of your loan.
But for all of their similarities, these two documents should not be seen as interchangeable.
The Loan Estimate Shows All Costs Associated With Your Loan
After applying for a mortgage, you will receive what is known as a loan estimate. This document shows all of the costs associated with your loan and is also known as a Good Faith Estimate (GFE). The loan estimate allows you to compare the costs of different lenders and includes fees and costs such as:
- Appraisal fees
- Origination fees
- Title search and title insurance
- Home inspection fees
These charges can differ based on the company you choose and some, like the home inspection, can be negotiated.
The Closing Disclosure Shows All Final Costs Before Closing
Your closing disclosure provides you with the same information as your loan estimate but the costs have been locked in. This five-page document shows you exactly how much you will be paying at closing. It is not uncommon for costs to change and your final closing costs to be lower or higher than the estimated amount.
Your lender is required to provide you the closing disclosure at least three business days before you close on your home. This timeframe is meant to give you time to review the document and compare it to your loan estimate. If you have questions about any changes, ask your lender before you go to closing.
Review All Information For Accuracy
No matter which document you are reviewing, double check each for accuracy and any junk fees that could artificially inflate your closing costs. The following should be correct:
- Loan number, term, product, and type
- Personal information
- Purchasing home address
- Sale price
If anything is incorrect, contact your lender to get it corrected. Otherwise, your closing will be delayed.
The experts at the Eric Merchant team is your top choice in helping guide you through the process and answering any questions you have. Review documents with your agent to ensure a smooth closing for all parties.