Loan Officer Practice Exam

What is the primary purpose of a Loan Estimate?

1. To outline closing disclosures

2. To provide a breakdown of loan costs

3. To inform about credit status

4. To confirm employment details

The correct answer is: To provide a breakdown of loan costs

The primary purpose of a Loan Estimate is to provide a breakdown of loan costs. This document is designed to give borrowers clear and concise information regarding the total costs associated with a mortgage loan. It includes details such as the loan amount, interest rate, monthly payments, and estimated closing costs. By delivering this information upfront, the Loan Estimate allows consumers to compare offers from different lenders, ensuring they can make informed decisions about which loan best suits their financial situation. While the other options refer to important aspects of the mortgage process, they do not capture the essence of the Loan Estimate. For instance, closing disclosures relate to final terms of the loan and detailed transaction costs that come after the Loan Estimate. Information about credit status is typically communicated in a different context, often in a credit report or during the pre-qualification phase. Employment details may be a part of the overall application process, but they are not the focus of the Loan Estimate. Thus, the breakdown of loan costs stands out as the central purpose of this important document for borrowers.