What Information Does a Loan Estimate Include?
Page one shows the loan amount, interest rate, monthly payment, and estimated closing costs. Page two breaks down closing costs into categories: loan origination fees, services you can and cannot shop for, taxes, and prepaid items like escrow deposits. Page three shows total cash needed to close, a summary of the loan over its first five years, and comparison metrics like the APR and total interest percentage.
How Do You Use a Loan Estimate to Compare Lenders?
The standardized format makes comparison straightforward. Focus on the interest rate, APR (which includes fees), total estimated closing costs, and cash to close. A lower rate with higher fees may cost more than a slightly higher rate with lower fees, depending on how long you keep the loan. Request Loan Estimates from at least three lenders to find the best deal.
Can the Final Costs Differ from the Loan Estimate?
Yes, but federal rules limit how much costs can change. Certain fees (like the origination charge) cannot increase at all. Others (like title and recording fees) can increase by up to 10% collectively. A few costs (like prepaid interest and escrow) can change without limit. You will receive a Closing Disclosure at least three days before closing that shows final numbers for comparison.
Frequently asked questions
Does receiving a Loan Estimate commit me to a lender?
No. A Loan Estimate is not a loan commitment or approval. You can receive Loan Estimates from multiple lenders without obligation. Shopping around within a 14-day window counts as a single credit inquiry for scoring purposes.
What should I do if my Loan Estimate looks wrong?
Contact your lender immediately to clarify any discrepancies. Common errors include incorrect property taxes, wrong loan type, or missing fees. Getting corrections early prevents surprises at the closing table.