By: Mikel Dunnagan
The Loan Estimate has several new features in addition to the information currently required on the Good Faith Estimate and Early Truth in Lending disclosure. Below we elaborate on a few:
- Years describes the approximate length of time each disclosed payment would last. Descriptions can include a single payment, several payments or a range of payments.
- Principal and Interest discloses the total amount of principal and interest paid during the period indicated including both amortizing loans as well as interest only loans. If the payment is interest only, the statement, “Only Interest” must be used in the column(s) to which it applies in order to indicate that no principal is being paid during this period.
- Mortgage Insurance describes the amount and length of time the applicant may have to pay mortgage insurance, if any is required.
- Estimated Escrow reflects the estimated amount of taxes and insurance during the term of the loan. It does not take into account the expected increase in these items but does note that they can increase over time. This amount, if any, will remain constant on the Loan Estimate throughout the term of the loan, regardless of the number of columns.
- Estimated Total Monthly Payment discloses the total of all components including principal, interest, mortgage insurance and escrow. Where a range of payments is reflected, the Total Monthly Payment will also reflect a range of payments. Where the unit period is anything other than monthly (bi-weekly, semi-monthly, quarterly), that period must be disclosed in place of “monthly.”
- Estimated Taxes, Insurance & Assessments contains the total MONTHLY cost for the items shown – taxes, insurance, homeowner’s association dues, etc. This amount may differ from the Estimated Escrow amount since its section only discloses insurance and taxes. Any other associated costs must be paid outside of escrow, noted in the footer for this section. This amount must be rounded to the nearest whole dollar. Regardless of whether an escrow account is established, the monthly estimated taxes, insurance and assessments must be disclosed. Unlike the Estimated Total Monthly Payment, the unit period is always monthly. Lenders should verify that their doc prep system can accommodate calculating other than monthly payments for the Estimated Total Payment and a monthly payment for estimated taxes, insurance and assessments.