What is the Loan Estimate (LE)
When you apply for a home loan you are entitled to know in advance what the true cost of the loan will be. In the past, a good faith estimate (GFE) was used and it has been now replaced by the loan estimate (LE) which is intended to be a uniform, clutter-free and user-friendly replacement.
The three main uses of the Loan Estimate form are:
to allow consumers to locate key information about the loan they have applied for;
to give the consumer a form with which to compare loan options; and
to give the consumer a way to compare initial costs disclosed by the lender with the actual closing costs on the loan.
The loan estimate is given to you AFTER you find a property since the fees disclosed on it are binding for the lender and subject to strict tolerances for changes. You may ask, however, for an estimate of fees worksheet when you start the loan application process with your lender. INSIST on getting an estimate of fees worksheet in writing! If the person you are working with won't give it to you simply move on and find someone else who will give it to you. Working with a lender who is transparent from the beginning will give you peace of mind knowing that you are being duly informed.
Ask your lender to go over these two documents with you and answer any questions you may have on any charges appearing there.
What is the Closing Disclosure (CD)
The closing disclosure is the final estimate of what the actual closing costs and loan terms are. It is to be compared with the loan estimate you received within three days after you submitted your loan application to the lender and it cannot deviate significantly from it. It must be reviewed and approved by you before the loan documents are drawn.
The Closing Disclosure is to be provided to you no later than three business days before loan consummation.