How to read your Loan Estimate, page by page
The Loan Estimate is a standard three-page form that lets you compare offers. Here is what each part tells you.
What it is
Within three business days after you apply for a mortgage, the lender must give you a Loan Estimate. It is a standardized form, so estimates from different lenders look the same and can be compared side by side. It is an estimate of your loan terms and costs, not a final commitment.
Page one: the loan itself
Read the section on whether the rate can change first. It tells you how the loan is built.
- The loan amount, the interest rate, and the monthly principal and interest payment.
- Whether the rate or payment can change, and whether there is a prepayment penalty or a balloon payment.
- A projected total monthly payment that adds estimated taxes, insurance and any association dues.
- An estimate of the cash you need to bring to closing.
Page two: the costs
Costs are grouped into sections. The lender's own charges appear first, then the services you can shop for, such as title, and then taxes, prepaid items and the money set aside in escrow. You are allowed to shop for the services marked as shoppable. Ask questions about any line you do not recognize.
Page three: comparing and the fine print
The last page includes a comparison section that helps you weigh one estimate against another, including the total you will have paid over the first five years and how much of that goes toward principal. It also lists the lender's contact information and states what happens if the loan is sold or serviced elsewhere.
A habit worth building
Compare Loan Estimates for the same loan type and the same term, so you are comparing like with like. A licensed originator can walk through yours line by line. There is no obligation to ask.
Questions about your situation?
Tell us about your loan and a licensed originator will follow up. There is no obligation to ask.