How do I read a Loan Estimate?
Read the three-page form in order: loan terms, projected payments, costs, cash to close and comparisons.
A Loan Estimate is a standardized three-page form that helps you understand and compare a mortgage offer.
Start with the loan terms and projected payment on page one, review detailed costs on page two, then use the comparisons and other disclosures on page three.
Confirm that you are comparing offers with the same loan type, amount and assumptions.
Page one: loan terms
Check the loan amount, interest rate, monthly principal and interest, and whether any of those figures can change. Also look for prepayment penalties or balloon payments.
Projected payments
The payment table separates principal and interest from mortgage insurance and estimated escrow. It also shows an estimated total payment, which can change if taxes or insurance change.
Taxes, insurance and assessments
Review what is included in escrow and what may need to be paid separately, such as certain property taxes, homeowners insurance or association assessments.
Page two: loan costs and other costs
Loan Costs include origination charges and services. Other Costs can include taxes, government fees, prepaids, initial escrow and additional transaction charges.
Points and lender credits
Points generally increase upfront cost to reduce the rate. Lender credits generally reduce upfront cost in exchange for a higher rate. Evaluate the tradeoff over your expected timeline.
Calculating cash to close
This section combines total costs with the down payment, deposits, seller credits and other adjustments to estimate the money needed at closing.
Page three: comparisons
The Comparisons section includes five-year cost information, APR and total interest percentage. These measures can help compare similar offers but should be read with the full terms.
Compare Loan Estimates side by side
Make sure the underlying scenarios match, then compare rate, APR, payment, lender charges, points, credits and cash to close.
Use the official disclosures and ask a qualified mortgage professional to explain differences. The signed lender documents remain the authoritative source for the offer.
Organize the Numbers Side by Side
Sources
- Consumer Financial Protection Bureau — Loan Estimate explainer
- Consumer Financial Protection Bureau — Your home loan toolkit
- Consumer Financial Protection Bureau — Compare and negotiate your loan offers