What financial document outlines loan terms before closing?

What financial document outlines loan terms before closing?

• A. Loan Estimate
• B. Final Agreement
• C. Closing Statement
• D. Borrower Acknowledgment

Answer: (A)

The Loan Estimate is the correct answer because it is a standardized form provided to borrowers that outlines the key terms and costs associated with their mortgage loan before closing. It includes essential details such as the interest rate, monthly payment amount, estimated closing costs, and other important loan information. This document is designed to help borrowers understand their mortgage options and make informed decisions. The Loan Estimate must be provided within three business days after a borrower applies for a mortgage, ensuring that they have sufficient time to review the terms before moving forward with the loan process. This transparency is crucial for empowering borrowers and promoting clarity in the lending process. In contrast, the Final Agreement typically refers to the final contract that is signed at closing, which may summarize the terms but does not provide the detailed breakdown like the Loan Estimate. The Closing Statement, also known as the HUD-1 or Closing Disclosure in some cases, is provided at or before closing and details the final costs and transactions but not the terms prior to closing. The Borrower Acknowledgment is a form confirming that the borrower has received specific documents, but it does not outline loan terms. Therefore, the Loan Estimate stands out as the key document for laying out the financial outline before closing.

The Loan Estimate is the correct answer because it is a standardized form provided to borrowers that outlines the key terms and costs associated with their mortgage loan before closing. It includes essential details such as the interest rate, monthly payment amount, estimated closing costs, and other important loan information. This document is designed to help borrowers understand their mortgage options and make informed decisions.

The Loan Estimate must be provided within three business days after a borrower applies for a mortgage, ensuring that they have sufficient time to review the terms before moving forward with the loan process. This transparency is crucial for empowering borrowers and promoting clarity in the lending process.

In contrast, the Final Agreement typically refers to the final contract that is signed at closing, which may summarize the terms but does not provide the detailed breakdown like the Loan Estimate. The Closing Statement, also known as the HUD-1 or Closing Disclosure in some cases, is provided at or before closing and details the final costs and transactions but not the terms prior to closing. The Borrower Acknowledgment is a form confirming that the borrower has received specific documents, but it does not outline loan terms. Therefore, the Loan Estimate stands out as the key document for laying out the financial outline before closing.