In which scenario is a loan estimate required by law?

In which scenario is a loan estimate required by law?

• A. When a refinancing option is proposed
• B. When a borrower applies for a mortgage
• C. When a borrower is denied for a mortgage
• D. When property taxes are being assessed

Answer: (B)

A loan estimate is required by law when a borrower applies for a mortgage. This is mandated under the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA), which aim to provide borrowers with clear and concise information about the terms and costs of the loan they are applying for. The loan estimate must be provided within three business days of receiving the application and includes critical information such as loan terms, projected payments, closing costs, and other fees. In contrast, a loan estimate is not required in scenarios such as when a refinancing option is proposed, when a borrower is denied for a mortgage, or when property taxes are being assessed. These situations do not meet the specific criteria that trigger the requirement for a loan estimate under the applicable regulations. Thus, the requirement is specifically linked to the application process for a mortgage loan.

A loan estimate is required by law when a borrower applies for a mortgage. This is mandated under the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA), which aim to provide borrowers with clear and concise information about the terms and costs of the loan they are applying for. The loan estimate must be provided within three business days of receiving the application and includes critical information such as loan terms, projected payments, closing costs, and other fees.

In contrast, a loan estimate is not required in scenarios such as when a refinancing option is proposed, when a borrower is denied for a mortgage, or when property taxes are being assessed. These situations do not meet the specific criteria that trigger the requirement for a loan estimate under the applicable regulations. Thus, the requirement is specifically linked to the application process for a mortgage loan.