The Loan Estimate (LE) is a standardized three-page document showing your interest rate, monthly payment and closing costs. Lenders must provide it within 3 business days of your application. Use the LE to compare offers by looking at the APR (which includes fees), total closing costs on page 2, and cash needed to close on page 1. Don’t just compare rates—compare total costs.
What Is the Loan Estimate?
Purpose
The Loan Estimate helps you:
- Understand loan terms before committing
- Compare offers from different lenders
- Identify all costs upfront
- Make informed decisions
When You’ll Receive It
Within 3 business days of:
- Submitting a loan application
- Providing name, income, SSN, property address, estimated value and loan amount
How Long It’s Valid
The LE is an estimate, not a guarantee. Terms may change based on:
- Verification of your information
- Appraisal results
- Rate lock timing
- Changes to your application
Page 1: Loan Terms and Costs
Section 1: Loan Terms
| Field | What It Means |
|---|---|
| Loan Amount | Principal you’re borrowing |
| Interest Rate | Your rate (may be locked or not) |
| Monthly Principal & Interest | P&I portion of payment |
| Prepayment Penalty | Whether early payoff triggers fees (rare) |
| Balloon Payment | Whether a large payment is due later (rare) |
Check for:
- Rate is what you discussed
- “Can this amount increase?” answers match expectations
- No unexpected penalties
Section 2: Projected Payments
Shows your total monthly payment including:
| Component | Description |
|---|---|
| Principal & Interest | Loan repayment |
| Mortgage Insurance | PMI/MIP if applicable |
| Estimated Escrow | Taxes and insurance |
| Estimated Total | Full monthly payment |
Important: This is your actual monthly cost, not just P&I.
Section 3: Costs at Closing
| Field | Description |
|---|---|
| Estimated Closing Costs | Total fees (detailed on page 2) |
| Estimated Cash to Close | Total money needed at closing |
Cash to close includes:
- Closing costs
- Down payment
- Prepaid items
- Minus any credits
Page 2: Closing Cost Details
Section A: Loan Costs (Lender Fees)
Origination Charges:
- Points (if any)
- Origination fee
- Underwriting fee
- Processing fee
These are negotiable. Compare across lenders.
Services You Cannot Shop For:
- Appraisal
- Credit report
- Flood certification
- Tax monitoring
Lender chooses these providers.
Services You Can Shop For:
- Title services
- Title insurance
- Survey
- Pest inspection
You can choose your own providers for these.
Section B: Other Costs
Taxes and Government Fees:
- Recording fees
- Transfer taxes
Prepaids:
- Prepaid interest (from closing to month-end)
- Homeowners insurance premium
- Property taxes (months of reserves)
Initial Escrow Payment:
- Property taxes held in escrow
- Insurance held in escrow
- Mortgage insurance (if applicable)
Section C: Total Closing Costs
Sum of all costs in Sections A and B.
Compare this number across lenders—it’s the true cost of getting the loan.
Lender Credits
If the lender provides credits:
- Shown as negative number
- Reduces your closing costs
- Usually in exchange for higher rate
Page 3: Additional Information
Comparisons Section
In 5 Years:
- Total you will have paid
- Principal you will have paid off
- Shows how much goes to interest vs principal
Annual Percentage Rate (APR):
- True cost of borrowing including fees
- Higher than interest rate
- Best comparison tool across lenders
Total Interest Percentage (TIP):
- Total interest as percentage of loan
- Shows long-term cost
Other Considerations
Appraisal: Whether you have right to copy
Assumption: Whether loan is assumable
Homeowner’s Insurance: Reminder that it’s required
Late Payment: Fee for late payments
Refinance: Whether you could lose protections if you refinance
Servicing: Whether lender will service or transfer servicing
Comparing Loan Estimates
Key Numbers to Compare
| What to Compare | Where to Find |
|---|---|
| Interest rate | Page 1, top |
| APR | Page 3, Comparisons |
| Total closing costs | Page 2, Section J |
| Cash to close | Page 1, bottom |
| Monthly payment | Page 1, Projected Payments |
APR Is Your Best Tool
APR includes the rate plus fees, expressed as a yearly rate.
Example:
- Lender A: 6.5% rate, 6.7% APR
- Lender B: 6.375% rate, 6.8% APR
Lender A’s lower APR means lower total cost despite similar rates.
Watch for Fee Differences
Common fee variations:
| Fee | Low | High |
|---|---|---|
| Origination | $0 | $3,000+ |
| Underwriting | $0 | $1,000 |
| Processing | $0 | $700 |
| Application | $0 | $500 |
Same-Day Comparison
Rates change daily. Compare LEs received on the same day for accurate comparison.
What Can Change After the LE
Costs That Cannot Increase
- Lender origination charges (unless rate isn’t locked)
- Transfer taxes
Costs That Can Increase Up to 10%
Combined total of:
- Recording fees
- Title services (if you use lender’s provider)
- Title insurance (if you use lender’s provider)
Costs That Can Change Freely
- Title services (if you shop yourself)
- Prepaid interest
- Property taxes
- Homeowners insurance
- Items you chose to change
What Triggers Changes
Changed circumstances that allow updates:
- Property information differs from application
- You requested changes
- Credit report information differs
- Appraisal comes back different
Lender must provide updated LE if changes are significant.
From Loan Estimate to Closing Disclosure
The Transition
- LE is the estimate
- Closing Disclosure (CD) is the final version
- CD must be received 3 days before closing
- Compare CD to LE for unexpected changes
What to Compare
LE vs CD:
- Are fees higher than LE without explanation?
- Did any terms change?
- Are there new fees?
- Is cash to close different?
If significant differences: Ask lender to explain before closing.
Red Flags on Loan Estimates
Warning Signs
Missing fees:
- LE seems too low
- Major fees at $0 that normally aren’t
- Suspiciously low closing costs
Unexplained charges:
- Vague fee names
- “Miscellaneous” or “other” fees
- Fees that seem duplicated
Rate not locked:
- LE says “Rate Lock: No”
- Rate could change significantly
- Ask about lock policy
High APR vs rate spread:
- If APR is much higher than rate
- Indicates high fees
- Compare to other offers
Questions to Ask
- Is the rate locked?
- Why is this fee charged?
- Can I shop for this service?
- What would change this estimate?
- Are there any fees not shown here?
Negotiating Based on the LE
What’s Negotiable
Definitely negotiable:
- Origination fee
- Application fee
- Processing fee
- Rate (via points)
Sometimes negotiable:
- Underwriting fee
- Lender credits
Not negotiable:
- Government fees
- Third-party fees (though you can shop)
- Prepaid items
How to Negotiate
Use competing offers: “I have an LE from [Lender B] with $2,000 less in origination fees. Can you match?”
Ask directly: “Can you reduce or waive the application fee?”
Request lender credits: “Can you provide a credit toward closing costs?”
Sample Loan Estimate Review
Checking a $350,000 Loan LE
Page 1 Review:
- Loan amount: $350,000 ✓
- Interest rate: 6.5% ✓
- Monthly P&I: $2,212 ✓ (matches calculation)
- Prepayment penalty: No ✓
- Rate locked: Yes ✓
Page 2 Review:
- Origination charges: $3,500 (1% is reasonable)
- Appraisal: $500 (normal)
- Title insurance: $2,200 (shop around)
- Total closing costs: $12,500 (3.6% is normal range)
Page 3 Review:
- APR: 6.72% (0.22% above rate = moderate fees)
- Compare to other LEs
Frequently Asked Questions
Is the Loan Estimate a commitment?
No. The LE is an estimate, not a binding commitment from the lender or you. Terms can change based on verification and appraisal.
What if I don’t get a Loan Estimate?
Lenders must provide one within 3 business days of application. If you don’t receive it, ask immediately or consider a different lender.
Can I negotiate the Loan Estimate?
Yes. Lender fees are negotiable. Use competing offers as leverage. Third-party fees are set by those providers but you can shop.
Why did my Loan Estimate change?
Changes happen due to: appraisal results, verification of information, your requests, or rate lock expiration. Lender must explain significant changes.
How does the Loan Estimate differ from the Closing Disclosure?
The LE is the estimate provided early in the process. The CD is the final version provided at least 3 days before closing. Compare them to verify accuracy.
What’s the difference between interest rate and APR?
Interest rate is the percentage charged on the loan. APR includes the rate plus fees, spread over the loan term. APR is higher and better for comparing total costs.
Michael Chen
Certified Financial Planner, Mortgage Specialist
Our team of mortgage experts provides accurate, up-to-date information to help you make informed decisions about your home financing.
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