You should be aware that there are several federal laws that provide you with protection
during the processing of your loan. The Equal Credit Opportunity Act, the Fair Housing Act,
and the Fair Credit Reporting Act prohibit discrimination and provide you with the right to
certain credit information. For more, you can turn to the web site of the Consumer Information Center of the U.S. General Services
Administration.
Once you have applied for the loan, the mortgage lender or broker must soon take certain
steps:
Truth-in-Lending Law
The annual percentage rate, or APR, of the loan must be disclosed to you within three
business days of when you apply for the loan. This is the rate you will actually pay for
your mortgage after all the lender fees have been factored in, which is generally higher
that the stated or advertised interest rate. It is a good idea to ask for the APR of the
mortgage interest before applying for the loan.
Good Faith Estimate
This is a detailed list of estimated closing which the lender must also provide to you
within three business days of applying for the loan. The best approach is to request this
list before choosing a loan. For more, see section on Good Faith
Estimate: More Costs at Closing.
- Tip: Keep your good faith estimate and compare it to the final list of
closing costs and ask your lender about any changes. Keep track of everything you pay in
connection with the mortgage application and getting your house and loan, and be sure those
payments have been credited to you at the closing.
Servicing Disclosure Statement
Federal law requires the lender or mortgage broker to tell you in writing, when you apply
for a loan or within the next three business days, whether it expects that someone else will
be collecting the payments or servicing your loan.
Then what?
Processors in the mortgage bank or company will organize your paperwork and may verify your
employment status, bank balances and other information from your application. An underwriter
reviews all the information in your loan file to determine if the application meets lending
guidelines. At this point, the loan is either approved or denied. In the latter case, see
the section What to Do If Your Loan is Denied.
Once all the paperwork is in order, and your application is complete, the lender or mortgage
broker must let you know within 30 days whether or not your loan has been approved. With
approval, a lender should give you a letter of commitment, which is a promise from the
lender to make a loan based on specific terms and conditions.
- Tip: Once you receive your loan, and you're waiting to close on the sale of
the home, don't go on a shopping spree. The mortgage lender may do a final check of your
credit report or bank accounts to make sure you're not assuming more debt or spending away
your cash reserves.