What a Loan Estimate is
Within three business days of applying, a lender is required to send you a Loan Estimate. It is a standardized three-page form that lays out the loan terms, the monthly payment, and the costs to get the loan closed. Because every lender uses the same format, it is designed to let you compare offers side by side.
It is an estimate, not a final bill. But it is the best early look at your numbers, and it is worth reading line by line.
Page 1: the loan itself
Start at the top. This page answers the big questions.
- Loan amount, interest rate, and loan term: confirm these match what we talked about.
- Can the rate or payment change: this tells you whether the loan is fixed or adjustable, and whether there is a prepayment penalty or balloon payment.
- Projected payments: your estimated monthly payment, including mortgage insurance and estimated escrow items if they apply.
- Costs at closing: an estimate of your closing costs and your cash to close.
Page 2: where the money goes
This page breaks closing costs into lettered sections. A few worth understanding:
- Origination charges: what is charged for making the loan.
- Services you cannot shop for: items the lender selects, like the appraisal.
- Services you can shop for: items like title services, where you may be able to choose your own provider.
- Taxes and other government fees: recording fees and any transfer taxes.
- Prepaids and initial escrow payment: money set aside upfront for items like homeowners insurance and property taxes. This is not extra cost so much as paying certain bills ahead of time.
At the bottom you will find your estimated cash to close, which combines your down payment (or any payoff on a refinance) with the closing costs, less any credits.
Page 3: the comparison tools
The last page includes figures that help you compare offers, such as the total you will have paid after five years and the annual percentage rate (APR). The APR folds certain fees into the rate, so two loans with the same interest rate can have different APRs.
Questions worth asking
- Does the rate and loan type match what I expected?
- Which of these fees are the lender's, and which belong to third parties like title or escrow?
- Is the rate locked, and until when?
- Which charges can change before closing, and which are limited by rule?
- If I am comparing lenders, am I comparing the same loan, with the same rate lock, on the same date?
Common mix-ups
A lower rate does not always mean a cheaper loan. Fees and points can offset it, which is why page 2 and the APR matter. Also, the Loan Estimate is not a loan approval. It becomes more reliable as your income, assets, and property are verified.
The practical takeaway: read page 1 for the loan terms, page 2 for the costs, and page 3 to compare. If anything looks different from what you expected, ask about it right away. Walking through your Loan Estimate together is one of the most useful conversations we can have.
Want the full walkthrough? Comment or message me the word ESTIMATE and I will send you the guide.
General information only. Eligibility, terms, and requirements vary by lender and borrower, and not everyone will qualify. This is not a commitment to lend.