RESPA and TILA mortgage disclosures are a part of every mortgage process. They show you the important information regarding your mortgage. You can expect to see information regarding the interest rate and the closing fees as well as the terms of the mortgage. The disclosures are meant to provide you with a true understanding of the loan you are about to take. The disclosures are meant to help you not only understand the loan, but also comparison shop if you obtain quotes from several lenders.
The New Disclosures
RESPA and TILA mortgage disclosures were around for many years. Recently, however, the Consumer Financial Protection Bureau made things a little easier for borrowers. As a part of the RESPA and TILA disclosures, you will receive a Loan Estimate. This three page document covers the information that the old Good Faith Estimate and Truth-in-Lending provided. In addition, the closing documents became more simplified. Instead of the HUD-1 and TIL, you will receive just the Closing Disclosure.
What is the Loan Estimate?
The Loan Estimate is the mortgage disclosure you must receive within 3 business days of applying for a loan with any lender. If you apply with several lenders, you will receive several copies of this document in the mail. This way you can comparison shop between the lenders. The Loan Estimate shows you the term, costs, and interest rates for the loan. It helps you realize what the loan will really cost you in the end. It replaces the original Good Faith Estimate and Truth-in-Lending.
What is the Closing Disclosure?
The Closing Disclosure replaces the HUD-1 Settlement Statement. You must receive this document at least 3 days before you close on your loan. This statement shows you exactly what you will pay for the loan as well as the term and interest rate you will pay. This document should be carefully reviewed before you sign any of the loan documents.If there is something that does not look like what you agreed to, you have 3 days to bring it up to the closing agent.
The Difference in the Loan Estimate
The Loan Estimate will look different to you than the standard Good Faith Estimate. The Loan Estimate is meant to be easier to read and understand. You can expect to see the following on this document:
- Origination Charges – These are the charges the lender will require in order to do business with them. Every borrower will have a different amount of origination charges based on the risk level of their loan.
- Services you Cannot Shop For – These are the required services for doing business with this lender. You do not have the option to choose a different person to provide the service. A few examples include the appraiser, credit reporting company, and flood monitoring company.
- Services you Can Shop For – These are also required services, but you may be able to shop around to find the best price. The most common services are those provided by the title company or closing agent.
- Miscellaneous Charges – These include tax service fees, escrow payments, and prepaid costs.
RESPA and TILA mortgage disclosures are an important part of the mortgage process. Because the documents are easier to read, they make the loan process less stressful. Rather than finding yourself swimming in a sea of documents you do not understand, you can have a few documents that spell out your terms and the consequences of the loan in plain English. This way you truly understand what you are getting yourself into before you sign on the dotted line.