What must lenders provide to borrowers within three business days of receiving a mortgage application?

• A. A Loan Estimate
• B. A closing disclosure
• C. A pre-approval letter
• D. An appraisal report

Answer: (A)

Lenders are required to provide a Loan Estimate to borrowers within three business days of receiving a mortgage application. The Loan Estimate outlines important details about the mortgage, including the estimated interest rate, monthly payment, and total closing costs. This document is essential for borrowers as it helps them understand the terms of the loan and allows for comparisons between different loan offers from various lenders.

The purpose of the Loan Estimate is to ensure transparency and facilitate informed decision-making by borrowers as they evaluate their mortgage options. This requirement is part of the regulations set by the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA), which aim to protect consumers in the mortgage lending process.

Other options, such as the closing disclosure, pre-approval letter, and appraisal report, serve different purposes and have different timelines. For example, the closing disclosure is provided closer to the time of closing, while a pre-approval letter may occur before a mortgage application is formally submitted. The appraisal report is typically completed after the loan application and is part of the underwriting process.