When applying for a new mortgage loan, there is an abundance of documentation, disclosures, and regulations involved. Whether you are looking to purchase a new home or refinance an existing mortgage, one of the first steps in the loan process is to review and e-sign a set of ‘Initial Loan Disclosures’.
The mortgage lender will prepare these disclosures and send them to you for electronic signatures as this is required before your loan can be underwritten.
While there are a lot of documents included in this disclosure package, most of them are in place to protect the borrower from predatory loan practices. These disclosures provide borrowers with an abundance of upfront information and confirm that you currently intend to proceed with the loan application. In fact, by electronically signing then, you are not obligated to move forward with the mortgage loan, and the mortgage terms can still be changed up until when the loan is ready to close.
The most important documents in the entire loan disclosure package are the ‘Uniform Residential Loan Application’ and the ‘Loan Estimate’. Both of these documents are worth spending a couple of minutes to read over to confirm that the information is accurate and up to date.
When looking over the Loan Application keep in mind that the income and assets sections are focused on only what is needed for qualifying. In other words, you might have additional income or assets that are not being used and are henceforth being left out intentionally as they provide no tangible benefit to your loan.
When looking over the Loan Estimate make sure that the actual loan terms being outlined are those you discussed with your loan officer. Be aware that the loan estimate will almost always over-disclose fees because if they end up being higher on the closing disclosure at the end of the process this creates costly regulatory issues for the lender. For example, an appraisal fee might be listed at $800 whereas the actual cost is expected to be closer to $500, which is common.
The majority of the other disclosures included in the initial package are meant to ensure you understand your rights as a borrower. For example the ‘Homeownership Counseling Notice’ and the ‘Federal Equal Credit Opportunity Act Notice’ both serve to outline how you should be treated by the lender.
Some other disclosures are used to assist with the loan process. For example, a ‘Borrower’s Authorization Form’ will help the lender obtain information on your behalf or a ‘4506-C Form’ will allow the lender to pull your tax transcripts on your behalf to verify certain tax information.
At the end of the day if you do have any questions while reading over initial loan disclosures it is always a good idea to give your loan officer a quick phone call. Oftentimes the issue can be resolved quickly and it can even makes sense to complete the e-signing as the issues can be addressed on later disclosures.
If you have any questions, please feel free to reach out to discuss with one of our Mortgage Loan Originators at (760) 930-0569.