Mortgage Process 2 — Questions and Answers
Question 1: What is the purpose of a Loan Estimate (LE) in the mortgage process?
- To finalize the loan terms after closing
- To provide a standardized summary of loan terms, projected payments, and closing costs (Correct answer)
- To replace the appraisal report
- To confirm the borrower's employment status
Correct answer: To provide a standardized summary of loan terms, projected payments, and closing costs
A Loan Estimate is a three-page form lenders must provide within three business days of receiving a loan application, summarizing key loan terms and estimated costs.
Question 2: How long does a lender typically have to provide a Loan Estimate after receiving a completed application?
- 1 business day
- 3 business days (Correct answer)
- 7 business days
- 10 business days
Correct answer: 3 business days
Under TRID rules, lenders must deliver the Loan Estimate within three business days of receiving a completed loan application.
Question 3: What triggers the three-day waiting period before a mortgage can close under TRID rules?
- Delivery of the appraisal report
- Delivery of the Closing Disclosure (Correct answer)
- Submission of the title commitment
- Completion of the underwriting review
Correct answer: Delivery of the Closing Disclosure
Borrowers must receive the Closing Disclosure at least three business days before consummation to review final loan terms.
Question 4: Which step in the mortgage process involves verifying that a property's title is free of liens or legal encumbrances?
- Appraisal
- Title search (Correct answer)
- Home inspection
- Underwriting
Correct answer: Title search
A title search examines public records to confirm the seller has clear ownership and to identify any outstanding liens, easements, or claims.
Question 5: What does 'rate lock' mean in the mortgage process?
- The borrower agrees to a fixed monthly payment
- The lender guarantees a specific interest rate for a defined period (Correct answer)
- The lender freezes the application review
- The borrower locks in their down payment amount
Correct answer: The lender guarantees a specific interest rate for a defined period
A rate lock is a lender's commitment to honor a quoted interest rate for a set period, protecting the borrower from rate increases before closing.
Question 6: What is the role of a mortgage underwriter?
- To conduct the home appraisal
- To assess whether the borrower and property meet the lender's criteria for loan approval (Correct answer)
- To negotiate the purchase price with the seller
- To calculate escrow payments
Correct answer: To assess whether the borrower and property meet the lender's criteria for loan approval
An underwriter evaluates the borrower's creditworthiness, income, assets, and the property's value to decide whether to approve, suspend, or deny the loan.
Question 7: Which document formally transfers ownership of a property from the seller to the buyer at closing?
- Promissory note
- Deed of trust
- Warranty deed (Correct answer)
- Settlement statement
Correct answer: Warranty deed
A warranty deed conveys title from seller to buyer and includes the seller's guarantee that the title is clear of undisclosed encumbrances.
Mortgage Process 2
What is the purpose of a Loan Estimate (LE) in the mortgage process?