Nationwide Mortgage Licensing System (NMLS) Practice Exam

What must lenders provide to borrowers within three days of a loan application under RESPA?

1. A Loan Estimate

2. A Closing Disclosure

3. A Good Faith Estimate

4. A Property Appraisal

The correct answer is: A Loan Estimate

Under the Real Estate Settlement Procedures Act (RESPA), lenders are required to provide borrowers with a Loan Estimate within three days of receiving a loan application. This document is designed to give borrowers a clear and concise summary of the key terms and costs associated with the loan they are applying for. It includes important information such as the estimated monthly payment, the amount of cash needed to close, and other fees related to the transaction. Providing the Loan Estimate within the three-day timeframe allows borrowers to understand the financial implications of their loan and helps them make informed decisions. This requirement emphasizes transparency and ensures that borrowers can compare different loan offers effectively before making a commitment. While the Closing Disclosure is important for detailing the final loan terms and costs, it is provided later in the process, usually at least three days before closing. A Good Faith Estimate was previously used in some cases as a means to provide borrowers with loan cost information, but it has been largely replaced by the Loan Estimate under current regulations. A property appraisal is also crucial in the lending process but is not a document required to be provided within the first three days of the application.