A couple with papers and a calculator in the kitchen figuring out the numbers.
A couple with papers and a calculator in the kitchen figuring out the numbers.
Photo by Mikhail Nilov from Pexels

On page 2 of the Loan Estimate, where it breaks down all the various costs and fees for your home loan, on the right side in Section F, there are prepaids.
There are a few things a lender will require you to pay in advance. What you would normally pay anyway in due time, the lender wants you to pay upfront so they are paid up to the next due date. These are mortgage interest, property taxes and homeowner’s insurance.

A couple looking at a laptop
A couple looking at a laptop
Photo by Jack Sparrow from Pexels

When you apply for a mortgage, lenders are required to send you a Loan Estimate with three days. The Loan Estimate will show you all costs associated with your mortgage. Review the Loan Estimate carefully and go over it with your mortgage consultant or Loan Officer.

Here we will focus on Section A. Origination Charges.

“Welcome to Our Home” brown print on white, worn wood with dark letters.
“Welcome to Our Home” brown print on white, worn wood with dark letters.
Photo by Pixabay on Pexels.com

What is it?

Lender’s title insurance is indemnity insurance protecting the lender of your home loan against problems with the title of your home. Lender’s title insurance only protects the lender. You should purchase owner’s title insurance to protect yourself against the same types of claims.

What problems can come up?

A clear title, free of any defects, is necessary for any real estate transaction. The title companies do a search before they will sell the insurance to double check there are no outstanding issues.

Typical problems that can arise are outstanding liens that pop up after you own the…

When you apply for a mortgage, the lender must send you the Notice to Applicant — Credit Score Information Disclosure (a/k/a the “H-3. Model form for credit score disclosure exception for loans secured by one to four units of residential real property”).

What is this thing all about? Let’s dig in.

The form looks like this.

Notice to the Home Loan Applicant from FederalReserve.gov

You are signing this because lenders are required to provide you with the credit score & credit history used when determining your eligibility for the loan and what rate they can offer. …

Man signing a form while at work
Man signing a form while at work
Photo by Cleyder Duque from Pexels

When you apply for a mortgage, you will be asked to sign this form. It will come with the initial disclosures required to be signed before the lender can work on your home loan request.

WTF is the Anti-Steering Loan Options Disclosure?

The Anti-Steering Loan Options Disclosure is required by Regulation Z: Loan Originator Compensation and Steering. Reg Z “prohibits certain practices relating to payments made to compensate mortgage brokers and other loan originators. The goal of the amendments is to protect consumers in the mortgage market from unfair practices involving compensation paid to loan originators.” Regulation Z implemented the Truth in Lending Act (TILA).

The rule does not allow a lender to pay an originator based on the mortgage transaction’s terms or conditions except the loan amount. …

Image for post
Image for post
Photo by Cytonn Photography

One of the many outcomes of the Great Financial Crisis on mortgage lending as an amendment of the Equal Credit Opportunity Act (Regulation B) that requires lenders to provide a free copy of all appraisals and written valuations done during the mortgage process.

A copy must be mailed to you a minimum of three days before your loan can close. If there are last minute changes to the appraisal, or you are trying to close quickly, this can cause a delay.

Most lenders will email you a copy as soon as they receive the report so waiting for a paper…

You see it staring back out at you on page 3 of the Loan Estimate. Big and glaring. Total Interest Percentage (TIP). And the percentage is huge! Something crazy like 69.45%. And you thought the interest rate was something in the single digits, right?

This is the amount of dollars paid in interest over the life of the loan expressed as a percentage of the original loan amount.

What does it mean? Glad you asked.

I’m using the Loan Estimate on the CFPB’s website for this. It’s here.

Image for post
Image for post
CFPB sample Loan Estimate — top of page 1

The loan amount is $162,000. The interest rate (note rate) is 3.875%…

Page 2 of the Closing Disclosure form used in residential mortgage lending
Page 2 of the Closing Disclosure form used in residential mortgage lending
The Aggregate Adjustment is shown on page 2 of the Closing Disclosure

You see it on every Closing Disclosure. Since it’s in Initial Escrow Payment at Closing section, and it’s a credit, you ignore it. Right? You know you do.

A client asks about it. Now what?

Like most everything in the home loan process, the escrow account set up must follow federal regulations.

First, what’s an escrow account. An escrow account is a single purpose account. It’s money that is collected to be spent for a one purpose. There are many different escrow accounts that can be set up. This is about the escrow account set up solely to pay your…

Image for post
Image for post

There are many articles about good debt v. bad debt. This is wrong. Debt is useful or useless.

Good debt is mostly mortgage and student loans — up to certain limits, the interest paid is tax-deductible.

Whether a debt’s interest payments are partially tax-deductible doesn’t tell the whole story. Nor is it helpful in daily life when those bills come — every month.

I prefer to consider debt useful or not, rather than good or bad.

Am I undertaking new debt to achieve a goal? If yes, this is a useful borrowing.

Sound goals might be to provide stability, safety…

Jeffrey Loyd

Mortgage Broker licensed in CO, FL. www.MortgageAcuity.com/jeffreyloyd

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store