Table of Contents
- What Are Netting Escrows & How Does It Work?: The Best Guide - January 2, 2024
- The Secret About Prescriptive Easement: Top Guide 1 Must Know - December 4, 2023
- About Home Equity Loans In Texas And How Can One Obtain It - November 27, 2023
What is a Mortgage Loan Estimate in Texas?
In addition to one of our previous discussions on comparing mortgage estimates, “Why Compare Your Mortgage Quotes?”
Today we will discuss understand what is a mortgage loan estimate in Texas? which is given to you by the bank or lender
The intention of doing this is to make sure you compare apples to apples and not apples to oranges.
At the end of this discussion, we will understand more about how to compare multiple mortgage loan estimates more accurately.
While comparing various mortgage loan estimates in Texas, it is essential to know the sections so that you can compare these mortgage loan estimates more efficiently.
1) Mortgage Loan Estimate
The mortgage loan estimate is a document that is provided by a bank or a lender, which includes the complete details about the loan you have requested.
Usually, the mortgage estimate is provided to the applicant within three business days from the application received date.
Let us understand the structure of a mortgage loan estimate in Texas. The mortgage loan estimate is a three-page standard layout, and the format is the same for every lender across the country.
We have managed to break down the loan estimate and made it easy for you to understand.
A) Page 1 Section A (Loan Estimate)
In this section, you would find the date issued, the name, and address of the applicant, and estimated property value on the left-hand side. Please ensure your name and address are spelled correctly.
Also, make sure if the estimated property value mentioned is close to the market value. You can check approximate property values in your area online.
On the right side of the mortgage estimate, you have Loan Term (make sure it shows the correct tenure you requested for).
Purpose of the loan that you applied (Refinance or New Home Purchase). Product (Fixed rate or Variable rate).
Loan Type (Conventional, VA, FHA, or any other). The loan ID number and Rate lock (whether the rate is locked with an end date).
B) Page 1 Section B (Loan Terms)
Loan Amount: This is a total loan amount, including all the costs except cash to close and down payment. If you are purchasing a new property, the sum of this amount and your down payment should equal the property sale price.
You need to ask the lender for the reason if there is a difference. The loan amount would vary from lender to lender depending on the closing costs charged by them.
Make sure you check the loan amount section in your mortgage estimate to make a wise comparison.
Interest Rate: This indicates the interest rate offered to you by the lender. Please ensure the rate mentioned is the rate you were assured. The column next to the interest rate is the one to look out for.
If it says “YES” means you have been offered an adjustable rate. This is the column to remember if you want to compare mortgage loan estimates in Texas with multiple lenders.
Monthly Principal & Interest: This shows how much would be your estimated monthly payments, including principal and interest.
Prepayment Penalty: If this column in the mortgage loan estimate says “YES,” it means you have to pay a penalty of the agreed amount if you pay off the mortgage before a specific time. We would suggest going for other options if this says “YES.”
Balloon Payment: If this column in the mortgage loan estimate says “YES,” it means you have to pay off the remaining mortgage balance before the mentioned maturity date. We would suggest going for other options if this says “YES.”
C) Page 1 Section C (Projected Payments)
This section in the mortgage loan estimate would help you anticipate your monthly payments, including principal, interest, mortgage insurance (in the case of FHA), and escrows.
Usually, the escrow amount mentioned is your current property taxes and home owner’s insurance, which can change during the tenure of the loan or if you decide to make changes in your current home owner’s insurance structure.
This column also shows the estimated property taxes and home owner’s insurance. The “Estimated Total Monthly Payment” is the column to remember if you want to compare quotes with multiple lenders.
D) Page 1 Section D (Costs at Closing)
Section D in the mortgage estimate shows your estimated closing costs, which are charged by the lender and cash to close, which determine if the money is to be paid by the borrower or to the borrower at the time of closing.
The closing costs and costs to close are mentioned in detail on page 2 of the loan estimate.
E) Page 2 (Closing Cost Details, Other Costs & Calculating Cash To Close)
This section in the mortgage loan estimate will give you bifurcation for the entire closing cost and cash to close. If you are thinking of negotiating with the lender, this is the section you need to go through.
There is a column that says, “C. Services You Can Shop For.” This is a section where you can shop for the mentioned services separately.
The critical thing to keep an eye on is “D. Total Loan Costs,” which is one of the factors to compare multiple mortgage quotes.
The “Calculating Cash To Close” section determines how much cash you have to pay at closing or how much cash in hand you will receive if you have opted for a cash-out refinance.
Ensure you understand page 2 while comparing the mortgage loan estimates in Texas.
F) Page 3 (Additional Information About This Loan, Comparisons & Other Consideration.)
Additional Information About This Loan: This section in the mortgage estimate shows information about the lender and the loan officer that you are working with.
Every loan officer needs to be licensed and registered with the Nationwide Mortgage Licensing System (NLMS).
Using the NLMS ID for the loan officer mentioned in this section, you can check on the NMLS database if the loan officer is licensed to operate in your state.
Comparisons: This is also a very informative section. It would help you analyze if the quote offered to you is working in your favor.
You need to make sure that you get a quote for the same loan from multiple lenders to get an accurate comparison because costs vary from lender to lender and loan to loan.
Other Considerations: This section gives you additional information about a few more attributes.
The vital thing to look for is “Late Payment,” as it explains what charges you would be looking at if the monthly payments are missed.
Conclusion
Because there are many loan programs and lenders, it would be an intelligent decision to compare the quotes before finalizing them.
Doing so might save you a considerable amount of money. If you compare, you save. Happy Comparing.
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