Texas Real Estate Brokerage Sales Apprentice Education (SAE) Practice Exam

What does RESPA require lenders to include as part of their loan disclosures within three days of loan application?

1. A summary of previous loans

2. A booklet entitled "Know Before You Owe"

3. An estimate of monthly payments

4. A current interest rate comparison

The correct answer is: A booklet entitled "Know Before You Owe"

The requirement by RESPA (Real Estate Settlement Procedures Act) for lenders to include a booklet entitled "Know Before You Owe" as part of their loan disclosures within three days of loan application is critical for ensuring consumers are informed about the mortgage process. This booklet is designed to provide borrowers with comprehensive information about the loan process, including the costs associated with obtaining a mortgage, the importance of understanding loan terms, and various consumer protections. This regulation aims to enhance transparency, allowing borrowers to make more informed decisions regarding their home financing options. The "Know Before You Owe" booklet serves as an essential educational tool, helping to demystify the complexities of mortgages and providing important insights into what borrowers can expect during the loan process. Other options such as a summary of previous loans, an estimate of monthly payments, or a current interest rate comparison may not fulfill the specific educational role that the "Know Before You Owe" booklet plays in the context of loan disclosures mandated by RESPA. While these elements may be relevant information in the lending process, they do not meet the explicit requirement set forth by RESPA for initial disclosures.