How can I confirm my interest rate and monthly payments?
Q: How can I make sure I’m getting the interest rate I was promised?
A: After you apply for a mortgage, bank and mortgage companies have three days to provide what’s called a Loan Estimate.
This three-page document explains the key terms of your home loan, including the interest rate.
On the first page look for the tab that says “Loan Terms” and the line that says “Interest Rate.” If this isn’t the rate you were expecting, now is the time to speak up.
If your interest rate is not locked in and can change prior to closing, you’ll see a “yes” next to the Interest Rate line.
The Loan Estimate is a new form that all lenders had to use as of Oct. 3. It was designed by the Consumer Financial Protection Bureau to replace the lender-created Good Faith Estimates borrowers have been receiving.
The Bureau thought a simpler, standardized form would make it easier for applicants to understand exactly what they were being offered and avoid any nasty surprises at closing time.
You’ll get a similar, easy-to-read Closing Disclosure when you reach the settlement table.
Q: Will that form tell me what my monthly payment will be?
A: Yes. The Tab “Projected Payments” breaks down the three major parts of a loan payment, and shows how they will change over time.
Principal & Interest: This is what you’re paying to reduce the amount you borrowed and cover the interest charges. You may see this cost increase in later years if you have an adjustable-rate loan.
Mortgage insurance: This coverage limits the lender’s losses if you don’t make your payments. Banks and mortgage companies usually require this protection when buyers put less than 20 percent down on a home. During the first seven years of the loan you’ll see a monthly premium. After that, the charge is usually zeroed out because you’ll have enough equity in your home to drop the coverage.
Estimated Escrow: Some lenders collect the money for property taxes, homeowners insurance and association fees in advance and pays those bills on your behalf. To see which bills your lender escrows for, look at the “Other Costs” tab on Page 2 of the form. Even though the “Estimated Escrow” line might not increase over time, you should fully expect this part of your monthly payment to rise as those premiums, taxes and fees to go up.