Mortgage Loan Originator (MLO) Licensing Practice Test 2025 - Free MLO Practice Questions and Study Guide

The correct answer is that a lender must provide borrowers with a Good Faith Estimate within 3 days of the loan application. This requirement is set by the Real Estate Settlement Procedures Act (RESPA), which aims to improve transparency in the mortgage process. The Good Faith Estimate outlines the estimated costs associated with the loan, including fees for services that the borrower is likely to incur, enabling borrowers to make informed decisions.

Providing the Good Faith Estimate within this timeframe ensures that the borrower receives crucial information early in the process, allowing them to compare costs with other lenders and understand their financial obligations before proceeding further. This is vital for promoting informed borrowing and preventing surprises at closing.

The other options are not correct because they do not align with the regulatory timeline established by RESPA. Presenting the estimate only upon request or at the time of closing would not provide the borrower with the necessary information in a timely manner. Moreover, a 30-day timeline would be too lengthy and could hinder the borrower’s ability to make timely comparisons and decisions regarding their mortgage options.