What does Regulation Z require for loan estimates in a mortgage transaction?

Regulation Z, part of the Truth in Lending Act, mandates that lenders provide a loan estimate to borrowers within three business days after they receive a mortgage application. This requirement is designed to promote transparency and allow borrowers to understand the key features, costs, and risks of the mortgage loan they are considering. By receiving the loan estimate shortly after applying, borrowers can compare offers from different lenders and make informed decisions about their mortgage options.

This three-day timeline ensures that borrowers have timely access to important information about rates, terms, estimated payments, and closing costs, thus aiding in the overall financial decision-making process. Providing the loan estimate at this point allows borrowers to respond more effectively to the information before they engage in further steps like underwriting or closing, which are more complex and may involve more commitment.

Other options do not align with Regulation Z's requirements because they either specify incorrect timelines or suggest that a loan estimate is conditional upon a request from the borrower, which is contrary to the proactive intent of the regulation. The focus of Regulation Z is to ensure that consumers receive essential loan information as early as possible in the mortgage process.