Can a lender charge a borrower for a loan application fee before providing the Loan Estimate?

The correct answer is based on the regulatory requirements outlined in the federal law, specifically the Truth in Lending Act and the Real Estate Settlement Procedures Act, which govern the disclosure of mortgage loan terms and costs to borrowers. Under these regulations, a lender is prohibited from charging any fees, including a loan application fee, before issuing the Loan Estimate.

The Loan Estimate is a crucial document that provides borrowers with a clear overview of the expected costs associated with their mortgage loan, allowing them to understand the terms, fees, and other essential details. By requiring the Loan Estimate to be provided before any application fees are charged, the law ensures that borrowers can make informed decisions based on transparent and complete information about the loan products available to them.

As a result, charging a loan application fee prior to providing the Loan Estimate would not only violate these regulations but also hinder the borrower's ability to evaluate their options effectively. This principle is fundamental in promoting fair lending practices and protecting consumers in the mortgage lending process.

Understanding this regulation underscores the importance of compliance in the mortgage lending industry, ensuring that lenders uphold transparency and integrity in their dealings with borrowers.