New York State Real Estate Salesperson Licensing Exam

As a result of TILA, which document must borrowers receive prior to closing?

1. Loan estimate

2. Good faith estimate

3. Truth in Lending statement

4. Closing disclosure

The correct answer is: Truth in Lending statement

The Truth in Lending Act (TILA) requires that borrowers receive specific disclosures about the terms and costs associated with their loans to ensure that they are fully informed before committing to a mortgage. One of the key documents that borrowers must receive prior to closing is the Truth in Lending statement. This document provides crucial information such as the annual percentage rate (APR), finance charges, and the total amount financed, which helps borrowers understand the true cost of borrowing. While other documents, such as the loan estimate and closing disclosure, are essential in the lending process, they serve different purposes and have distinct requirements. The loan estimate is provided after a mortgage application is submitted, outlining the estimated terms and costs. The closing disclosure, on the other hand, is delivered prior to closing and details the final terms of the loan, but it is not the specific document that TILA mandates to be received first. In summary, the Truth in Lending statement is critical under TILA, ensuring that borrowers have access to transparency regarding their loan's key terms before finalizing the agreement at closing.