When your loan officer informs you that your mortgage loan is “disclosed” and you need to sign it, the lender has prepared and provided you with the initial loan disclosure documents. These documents outline the terms, conditions, costs, and other crucial details of your mortgage loan. Signing these documents is a vital step in the loan process. Here’s what this entails:
What Does “Loan Disclosed” Mean?
The disclosure stage involves providing you with detailed information about your mortgage loan. This transparency helps you understand the financial commitment you are about to make. Key documents and elements included in this stage are:
- Loan Estimate:
- Overview: This document gives you an overview of the loan terms, estimated interest rate, monthly payment, and closing costs.
- Loan Features: This section includes details about the loan’s features, such as prepayment penalties or adjustable interest rates.
- Disclosures:
- Federal and State Mandates: These disclosures inform you of your rights and obligations as a borrower.
- Important Information: They may cover topics like your right to receive a copy of the appraisal and information about adjustable-rate mortgages (if applicable).
- Acknowledgement and Agreement:
- Confirmation: By signing these disclosure documents, you acknowledge receiving and reviewing the information.
- Non-Commitment: Signing does not mean you are committed to the loan; it simply confirms you have been informed about the loan details.
Preparing for Processing
Once you sign and return these documents, the lender can proceed with the next steps in the loan process, which include underwriting and final approval. Your acknowledgment allows the lender to verify all the information you have provided and ensure all necessary conditions are met.
Three-Day Review Period
According to federal law, specifically the TILA-RESPA Integrated Disclosure (TRID) rule, you must receive the Loan Estimate at least three business days before you are required to sign any loan documents. This period gives you time to review the terms and ensure you understand them before proceeding.
Commitment to Loan Process
While signing the disclosures does not lock you into the loan, it does indicate your intent to proceed with the lender’s loan process. You still have the right to shop around and compare offers from other lenders.
Next Steps
By signing the disclosed documents, you allow the lender to advance to the underwriting stage, where your loan application will be thoroughly reviewed for final approval. It’s important to read all the documents carefully, ask questions if anything is unclear, and ensure you understand all the terms and conditions of the loan before signing.
Conclusion
The loan disclosure stage is crucial for fully informing you about your mortgage loan. Reviewing and understanding these documents can help you make a confident decision about proceeding with the loan.
