Florida Broker Practice Exam

When must a loan applicant be provided with an estimate of settlement costs?

1. At the closing meeting

2. Immediately after loan approval

3. When the loan application is submitted

4. Three business days before closing

The correct answer is: When the loan application is submitted

The correct answer is that a loan applicant must be provided with an estimate of settlement costs when the loan application is submitted. This is in accordance with the Real Estate Settlement Procedures Act (RESPA), which mandates that borrowers receive a Good Faith Estimate (GFE) of their settlement costs shortly after they apply for a mortgage. This practice is in place to ensure transparency and allow borrowers to understand the potential costs associated with their loan, enabling them to make informed decisions. Receiving this estimate at the time of application helps to set realistic expectations regarding the financial obligations that come with securing a loan. It provides an opportunity for applicants to review and compare costs across various lenders, thus promoting competitiveness and better consumer choices in the loan market. Providing estimates at other points, such as just prior to closing or after loan approval, would limit the borrower’s ability to shop around or question fees in advance, which is contrary to the intent of RESPA to protect consumers.