According to the RESPA act, when is a borrower entitled to receive a loan estimate of settlement costs?

A borrower is entitled to receive a loan estimate of settlement costs within three days of application as stipulated by the Real Estate Settlement Procedures Act (RESPA). This requirement is designed to ensure transparency and provide borrowers with a clear understanding of the estimated costs associated with their mortgage loan. The loan estimate includes essential information such as the estimated monthly payment, interest rate, closing costs, and other information vital to making an informed decision regarding the mortgage.

This three-day timeframe is critical because it allows borrowers to review and compare loan costs from various lenders, thus promoting informed choices and better financial planning. Providing the loan estimate within a shorter time frame, such as 24 hours, does not offer sufficient time for borrowers to understand, assess, and compare the information, while a longer period, such as five days or receiving it at closing, would diminish the value of this initial disclosure. Therefore, the three-day requirement strikes a balance between timeliness and providing adequate information for borrowers to make informed decisions about their loans.