Loan Application (Form 1003)
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Purpose: Collects detailed borrower and property information.
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Contents:
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Personal Information: Borrower's full name, Social Security number, date of birth, marital status, dependents, and contact information.
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Employment Information: Employer details, job title, length of employment, and monthly income.
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Financial Information: Income sources, assets, liabilities.
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Property Information: Property address, purpose of the loan, estimated property value.
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Declarations: Information on past financial issues, legal judgments, and obligations.
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Loan Estimate (LE)
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Purpose: Provides a summary of key loan terms and estimated costs.
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Timing: Must be provided within three business days of receiving a loan application.
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Contents:
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Loan Terms: Loan amount, interest rate, monthly payments, prepayment penalties, balloon payments.
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Projected Payments: Breakdown of estimated monthly payments, including principal, interest, mortgage insurance, and escrow.
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Costs at Closing: Estimated total closing costs and cash needed to close.
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Other Information: Rate lock details, comparison of payments over time.
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Estimate Thresholds:
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Zero Tolerance: Fees that cannot change from the Loan Estimate to the Closing Disclosure, such as lender fees, third-party services not chosen by the borrower, and transfer taxes.
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10% Cumulative Tolerance: Fees that can change but the total increase cannot exceed 10% in aggregate, such as recording fees and third-party services chosen by the borrower from the lender's list.
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No Tolerance Limit: Fees that can change without restriction, such as prepaid interest, property insurance premiums, and initial escrow payments.
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Closing Disclosure (CD)
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Purpose: Provides final details about the mortgage loan.
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Timing: Must be provided at least three business days before closing.
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Contents:
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Loan Terms: Final loan amount, interest rate, monthly payments.
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Projected Payments: Detailed breakdown of monthly payments, including principal, interest, mortgage insurance, and escrow.
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Closing Costs: Itemized list of all closing costs, including lender fees, third-party fees, and prepaid items.
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Cash to Close: Total amount the borrower must bring to closing, factoring in down payment, closing costs, and credits.
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Cancellation/Denial Documentation
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Purpose: Inform the borrower of the cancellation or denial of a mortgage application.
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Contents:
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Notice of Action Taken: Explanation of the decision to cancel or deny the application.
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Reasons for Denial: Specific reasons for denial, such as insufficient credit score or inadequate income.
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Adverse Action Notice: Required by ECOA, explaining borrower’s rights and how to obtain a copy of their credit report.
Lock-in Agreement
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Purpose: Guarantees the interest rate for a specified period.
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Contents:
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Rate Lock: The locked interest rate.
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Lock Period: Duration for which the rate is locked (e.g., 30, 45, 60 days).
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Terms and Conditions: Conditions under which the lock can be extended or adjusted.
Written Commitment
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Purpose: Lender’s commitment to fund the loan if conditions are met.
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Contents:
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Loan Amount: The approved loan amount.
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Interest Rate: The committed interest rate.
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Loan Terms: Specific terms and conditions of the loan.
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Conditions: Required conditions to be met before closing (e.g., appraisal, title work).
Conflict of Interest Disclosures
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Purpose: Disclose any potential conflicts of interest.
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Contents:
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Relationship Disclosures: Relationships between the loan originator, real estate agents, and any affiliated businesses.
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Compensation Disclosure: Any financial interests or compensation received from other parties involved in the transaction.
Supporting Documentation for Fees
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Purpose: Justify fees charged to the borrower.
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Contents:
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Invoices: Detailed invoices from third-party service providers (appraisal, credit report, title services).
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Fee Estimates: Initial estimates provided in the Loan Estimate.
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Receipts: Proof of payment for any upfront fees or deposits.
Summary:
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Loan Estimate (LE): Provided within three business days of application, includes estimated loan terms and costs with specified tolerance thresholds.
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Loan Application (Form 1003): Detailed borrower and property information, including personal, employment, financial details, and declarations.
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Closing Disclosure (CD): Final loan terms and costs, provided three days before closing.
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Cancellation/Denial Documentation: Notification and reasons for denial, including adverse action notice.
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Lock-in Agreement: Guaranteed interest rate details for a specified period.
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Written Commitment: Formal lender commitment to fund the loan, subject to conditions.
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Conflict of Interest Disclosures: Potential conflicts between involved parties.
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Supporting Documentation for Fees: Justification for all fees charged, including invoices and receipts.