Loan Estimate <span class='t-red'>Explainer</span>

By Shahram Sondi


The Loan Estimate is basically a handy three-page form you get from your mortgage lender after you apply for a loan. It’s like a cheat sheet that breaks down all the important stuff about your loan, like how much you’re borrowing, the interest rate, and what your monthly payments might look like. It’s super helpful because it lets you compare different loan offers easily, so you can pick the one that works best for you. Plus, it gives you a heads-up on what to expect for closing costs, so there are no surprises down the line. Overall, it’s just there to make sure you’re clued in on the nitty-gritty of your mortgage deal.

What is a Loan Estimate For?

Let’s break it down.

  1. Transparency: The Loan Estimate’s main job is to lay out all the important stuff about your loan and how much it’ll cost to close the deal. Basically, it’s like your mortgage cheat sheet.
  2. Comparison Made Easy: Think of it as your trusty tool for comparing loan offers. It puts everything in the same format, so you can easily see which deal works best for you, whether it’s the interest rates, closing costs, or monthly payments.
  3. Protecting You: The Loan Estimate is all about making sure you’re in the know. It’s required by law for lenders to give you this info within three days of your mortgage application. That way, you’re not left in the dark about what you’re signing up for.
  4. Guessing Game No More: Ever wondered what it’ll cost to close the deal? The Loan Estimate takes the guesswork out of it by giving you an estimate of all the fees you’ll need to cough up, like lender fees, third-party charges, and prepaid items.
  5. No Last-Minute Surprises: No one likes surprises, especially when it comes to money. The Loan Estimate helps you avoid any nasty shocks at the closing table by laying out all the estimated costs upfront. That means you can review everything and ask questions before sealing the deal.

The Loan Estimate: Page by Page

Page 1:

  1. Loan Information: This section includes the loan amount, interest rate, monthly principal and interest, and loan term. It also specifies whether the interest rate can change over time (adjustable-rate mortgage) or if it’s fixed.
  2. Projected Payments: Here, you’ll find a breakdown of your estimated monthly payments, including principal, interest, taxes, insurance, and any homeowner association fees. It indicates if these amounts can change over time and includes the total estimated monthly payment.
  3. Costs at Closing: This section outlines the estimated closing costs, including origination charges, appraisal fees, title insurance, and taxes. It provides a total estimate of the amount due at closing.
  4. Loan Costs: Itemizes fees charged by the lender, such as application fees, underwriting fees, and points. Points are prepaid interest that can lower your interest rate, but they require an upfront payment.
  5. Other Costs: Lists additional expenses like taxes, insurance, and prepaid items such as homeowner association dues or interest payments before the first regular payment.

Page 2:

  1. Closing Cost Details: Provides a breakdown of each closing cost, including the lender’s charges, third-party services, and prepaid items. It also indicates whether each cost can increase or remain the same at closing.
  2. Calculating Cash to Close: This section shows the total amount you’ll need to bring to the closing table. It includes your down payment, closing costs, and any credits or adjustments.
  3. Comparisons: Compares this loan estimate with others you’ve received or may receive in the future. It includes key details like the interest rate, monthly payment, and total closing costs for easy comparison.

Page 3:

  1. Loan Disclosures: Provides important information about your loan, including whether there’s a prepayment penalty, whether the loan can be assumed by another borrower, and if there are any negative amortization features.
  2. Other Considerations: Outlines additional details about your loan, such as whether it includes a balloon payment or if there are any escrow requirements for taxes and insurance.
  3. Contact Information: Includes contact information for the lender and settlement agent, making it easy to reach out with questions or concerns.


  1. How Long’s It Good For? The Loan Estimate is typically valid for about 10 business days. It’s crucial to be mindful of the expiration date.
  2. Does It Mean You’re Approved? No, the Loan Estimate represents the bank’s plan and is not an approval. The actual approval process occurs at a later stage.
  3. Is It Required? Yes, you should receive the Loan Estimate within three business days of formally requesting a loan.
  4. Same as Closing Disclosure? While similar, the Closing Disclosure is a distinct document that provides a detailed breakdown of the actual loan costs and loan terms at the closing stage.

Bottom Line

The Loan Estimate serves as your mortgage cheat sheet, offering a concise overview of crucial details. It’s essential to read and comprehend its contents, keeping the process straightforward and devoid of unnecessary complexity.

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