What happens after I apply for a loan?
Unless the lender denies your application, you should look for these four important documents either at or shortly after application:
- Good Faith Estimate (GFE) disclosure. Generally, the lender is required to send to you the GFE within three business days after your application. It explains the basic loan terms and the costs you are likely to pay at the closing for the loan. If you decide to proceed with the loan, this form should give you a reliable estimate of most of the costs involved.
- Truth-In-Lending disclosure. Generally, the lender is required to send you an initial Truth-In-Lending disclosure statement no later than three business days after your application. It will include the following information:
o Your annual percentage rate (APR)
o Your finance charge
o The amount financed (the amount of credit provided on your behalf)
o The total of payments (the amount you will have paid after you have made all of your scheduled mortgage payments)
- Mortgage Servicing Disclosure. For many mortgage loans, the lender must provide you with the Mortgage Servicing Disclosure at the time your mortgage application is submitted or send it within three business days. This statement will tell you whether the lender may sell the servicing rights of its loans. If the servicing rights are sold, you will be dealing with a different servicer once you begin making payments on your loan.
- Settlement Cost booklet. The booklet will include information on the various stages of the home-buying process, home sale and purchase agreements, the Good Faith Estimate, required settlement services to close your loan, and the HUD-1 Settlement Statement that you will receive at closing.
In some cases you may receive additional information that will allow you to shop for loans with different lenders to find the loan most appropriate to your needs:
- If you are considering a loan with an adjustable rate, you should receive a booklet called the Consumer Handbook on Adjustable Rate Mortgages before you pay a non-refundable fee or are provided with an application to complete, whichever is earlier.
- If you are considering a home equity line of credit, you should receive a booklet called What You Should Know About Home Equity Lines of Credit before you pay a non-refundable fee or are provided with an application to complete, whichever is earlier.
The only fee a lender or mortgage broker can charge you before you receive the GFE and indicate intent to proceed with the loan is a fee for running your credit report.
After you receive your Good Faith Estimate your lender will verify information in your application before it will make a decision to give you the loan. Your lender will likely ask you for documents to verify your financial situation, such as paystubs or copies of your recent income tax returns as well as other information.
In addition, certain tasks related to the property may need to occur, such as a property appraisal. You may need to obtain homeowner’s insurance and possibly other property insurance, such as flood insurance.