So You Want A Loan Estimate

Effective October 3, 2015 CFPB implemented new rules replacing the Good Faith Estimate (GFE) and Truth In Lending (TIL) disclosures with the new Loan Estimate (LE).  In response some major adjustments are going to be necessary regarding when we provide a LE and how useful it will be to you in shopping for a mortgage.

The first change you need to be aware of is now the regulations assume that we have received a complete loan application from you when we issue the LE, and we are severely limited in our ability to issue a new LE if we issue one only to discover later after receiving a loan application and credit report that something was incorrect. 

It is also almost impossible for us to switch lenders once a LE has been issued since every lender has different fees and the lender fees cannot change on subsequent LE's.  If we give you a LE today, it is likely that the best lender in a few days or weeks when you have a home under contract and are ready to proceed will not be the same lender, but our hands will be tied and we will be forced to send your loan to the more expensive lender we originally quoted.  This defeats the entire purpose of using a Mortgage Broker to get your loan. 

Please note that CFPB does not consider a loan application complete unless it contains a complete property address for the home you want to finance, and we won't accept a loan application for a purchase that contains a property address unless you also supply a copy of the executed purchase contract, and evidence that the option period has expired or been terminated early.  Purchase loan applications that do not comply with this requirement will be denied.  The rules require us to either send you a LE or deny the loan within 3 days of receipt of a complete loan application, and since issuing a LE for a transaction that may cancel is pointless and has the potential to cause numerous headaches, we have opted to deny those loans. 

You can always reapply when your option period is over, but the better option is to complete the loan application and list the property address as TBD.  If you do that, we can prequalify you, then when you successfully complete the option period on your contract you can send it to us, and we will proceed.

If you are applying for a refinance, disregard the above and submit a complete loan application including your property address.

The next thing you need to be aware of is that the new LE is completely worthless for shopping for a loan.  It includes multiple fees and charges that have absolutely nothing to do with your lender and that will be exactly the same regardless of which lender you select, but that every lender is going to estimate differently resulting in you selecting the lender that low balled the non-lender closing costs and prepaids the most rather than the least expensive lender.  It is like shopping for a car and having every dealer include their guess as to the auto insurance premium in the price.  The dealer has no idea what the insurance is going to cost, and it has nothing to do with how much they are charging you for the car, but the dealer who low balls the insurance estimate is going to look the best even if they aren't giving you the best deal on the car.

The other problem with the LE is that it shows several fees/costs that are normally paid by the seller as charges to you the borrower and does not include the credits from the seller misleading you into thinking you will be coming to closing with a lot more money than you will in fact need.  How that is useful I don't know, but we will also be providing you with a Fee Worksheet that includes all the fees, costs, and credits.  It is the only document you should pay any attention to.

I recommend that you go to Custom Rate Quote if you want a quick, accurate and current rate quote that you can use to compare to what other lenders are offering and read the instructions on that page that explain how to correctly shop for a loan.  If you have any questions, please call.

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