Which document is crucial for ensuring transparency between the lender and borrower regarding fees?

The Loan Estimate is a critical document because it provides borrowers with clear and detailed information about the costs associated with a mortgage loan. This document outlines the loan's terms, including the estimated monthly payment, interest rate, and total closing costs, helping borrowers understand exactly what fees they will incur during the loan process.

The Loan Estimate is provided within three business days of a loan application and aims to promote transparency and facilitate comparison shopping between lenders. By giving borrowers a comprehensive overview of all associated fees and terms right at the beginning of the loan process, the Loan Estimate plays a vital role in protecting borrowers from unexpected costs later on.

Other documents like the Good Faith Estimate, Closing Disclosure, and Prepayment Penalty Disclosure serve different purposes in the loan process. The Good Faith Estimate is an older document primarily used for loans prior to the integration of new regulations in 2015. The Closing Disclosure provides final details about the loan, including the exact fees, but it comes later in the process. The Prepayment Penalty Disclosure specifically addresses potential fees for paying off the loan early, rather than overall loan costs. Thus, the Loan Estimate is the essential tool for ensuring transparency between lenders and borrowers regarding all expected fees.