What Happens After You Sign a Loan Estimate?

When you sign a Loan Estimate (LE), you're taking a crucial step towards securing a mortgage. This document is provided by your lender and outlines the terms and costs associated with your loan. However, signing the LE is just the beginning of a multi-step process. Here’s what happens next:

1. Review Period: After you sign the LE, you typically have a three-day review period before you need to make any further commitments. During this time, it’s essential to thoroughly review the LE to ensure that all the terms and costs are correct. Compare it with other loan offers if you have them, and consider consulting with a financial advisor or mortgage broker to clarify any doubts.

2. Loan Application: If you decide to proceed with the lender, the next step is to formally apply for the loan. This involves filling out a detailed application form where you provide personal and financial information. The lender will use this information to assess your eligibility for the mortgage.

3. Processing and Underwriting: Once your application is submitted, the lender’s processing team will gather additional documentation, such as your income verification, credit report, and employment history. This documentation is then sent to an underwriter who evaluates the risk of lending to you. The underwriter will review your financial stability and the details of the loan to ensure they meet the lender’s criteria.

4. Approval or Denial: After the underwriting process, you will receive a decision. If approved, you will receive a Closing Disclosure (CD) which provides final details about the loan’s terms and costs. If denied, the lender will provide reasons for the denial, which might include issues with your credit score, debt-to-income ratio, or other factors.

5. Closing Disclosure: The CD is similar to the LE but reflects the final terms of the loan. You’ll receive this document at least three days before your closing meeting. Review it carefully to ensure that it matches what was outlined in the LE. Discrepancies should be addressed immediately with your lender.

6. Closing Meeting: The final step is the closing meeting where you’ll sign the mortgage documents. This is where the loan funds are officially transferred to you, and you’ll pay any closing costs that are due. You’ll also need to provide proof of homeowner’s insurance and possibly a down payment, depending on the terms of your loan.

7. Post-Closing: After the closing meeting, the loan is officially in effect, and you’ll begin making monthly mortgage payments according to the terms outlined in your agreement. Keep track of your payments and review your mortgage statements to ensure everything is accurate.

In summary, signing a Loan Estimate is an important first step, but it’s followed by a series of steps including applying for the loan, undergoing underwriting, receiving a Closing Disclosure, attending a closing meeting, and beginning your mortgage payments. Each stage is crucial for ensuring that you secure the best mortgage terms and understand all associated costs.