Loan Estimate Explainer

Read your Loan Estimate like a loan officer.

Within 3 business days of your application, every lender has to hand you the same 3 page form. It is the best tool you have for comparing offers, and most buyers never read past the first box.

Below is a complete one, built for a $400,000 house in San Antonio at 6.125%. Click any numbered box and I will tell you what it means, what to check on yours, and how the number is figured. Flip the same loan between VA, FHA, and conventional and watch the form change.

Show it as

1Check this on your form 2A term worth knowing

Page 1 of 3. Every number above is computed from the sample loan, and every numbered box is clickable.

Page 2 of 3. Every number above is computed from the sample loan, and every numbered box is clickable.

Page 3 of 3. Every number above is computed from the sample loan, and every numbered box is clickable.

3 things to know

The form is the same everywhere.

Every lender in the country uses this exact 3 page layout, by law. That is the point of it. Get a Loan Estimate from 2 or 3 lenders for the same loan on the same day and the differences jump right off the page.

Some numbers cannot change. Some can.

Section A, the Section B services the lender picks, and transfer taxes are locked the moment you receive this form. Recording fees and the Section C services you choose from the lender's list can rise up to 10% in total. Prepaids, escrow, insurance, and any provider you find on your own can change freely, because they were never the lender's numbers to promise.

It is an estimate, not a commitment.

Getting a Loan Estimate does not obligate you to anything, and the only fee a lender can charge before you have it is the credit report. Nothing else can be charged until you tell the lender you intend to proceed. Until then, keep shopping.

Have one in hand?

Send me your Loan Estimate and I will walk through it with you.

Email it over, or book 15 minutes and share your screen. Line by line, no obligation. It is the fastest way to know whether the offer in front of you is a good one, and I will tell you if it is.

Email me your Loan Estimate Book a Free Consultation

Take it with you

Print the 1 page checklist.

Every "check this" item from the 3 pages, plus the 5 lines that should say NO or $0, on 1 sheet you can hold next to your own Loan Estimate.

Page 1: Loan terms and payments

Check the spelling of your name and the property addressYour name, the property address, and the sale price all need to match your purchase contract exactly.

Check the loan term, purpose, product, and loan typeThis box is the whole deal in 4 lines.

Check that the loan amount is what you expectedOn a purchase, the loan amount plus your down payment should equal the sale price.

Understand your monthly principal and interestThis is the payment on the loan itself: the money you borrowed plus the lender's interest on it.

Are there other charges built into your payment?Projected Payments adds the 2 things most people forget: mortgage insurance and escrow.

Does your Estimated Total Monthly Payment match what you were told?This is the number that leaves your bank account every month: principal, interest, mortgage insurance, and escrow together.

Are there taxes or insurance that are not in escrow?Look at the In escrow?

What are your estimated closing costs?Closing costs are the one-time costs to set up the loan and transfer the property: lender fees, title, appraisal, recording, plus the prepaids, which are the first year of insurance and the deposit that opens your escrow account.

Do you have enough cash for the Estimated Cash to Close?This is what you wire, or bring on a cashier's check, on closing day: closing costs plus your down payment, minus your earnest money deposit, any seller credit, and any costs that were rolled into the loan.

Page 2: Closing cost details

Compare Section A, Origination Charges, against other lendersSection A is what the lender charges for making the loan: points, origination fee, underwriting, processing, application fee, whatever they call it.

Compare Section B, Services You Cannot Shop ForThese are third party services the lender requires and picks: the appraisal, credit report, flood certification, and tax service.

Review Section C, Services You Can Shop ForThe lender requires these too, but you get to pick who does them: title insurance, settlement fee, survey, pest inspection.

Why are Other Costs listed?Sections E through H are not lender fees.

Is the homeowner's insurance premium accurate?Until you get a real quote, the lender is guessing at this number.

Are the property taxes accurate?The lender estimates taxes from the current tax bill or a rate for the county.

Does your loan include lender credits?If there is a number on the Lender Credits line in Section J, the lender is paying part of your closing costs.

Is the Estimated Cash to Close what you expected?This table shows the math: total closing costs, minus any closing costs financed into the loan, plus your down payment, minus your earnest money deposit, minus seller credits, plus or minus adjustments.

Page 3: Comparisons and other considerations

Is the loan officer information what you expected?The lender, the loan officer, and the NMLS ID should be the person you have actually been talking to.

Use the Comparisons box to compare Loan EstimatesThis is the fairest place to compare 2 loan offers.

How much is the late payment fee?Other Considerations tells you what happens if you pay late, a percentage of the payment after a 15 day grace period.

5 lines that should say NO or $0

NO Prepayment PenaltyPage 1, Loan Terms

NO Balloon PaymentPage 1, Loan Terms

NO Interest Rate, can this amount increase?Page 1, Loan Terms, unless you asked for an adjustable rate

$0 PointsPage 2, Section A, unless you chose to buy the rate down

$0 Lender CreditsPage 2, Section J, unless you chose a higher rate on purpose

Education, not a loan approval or financial advice. Have a Loan Estimate in hand? Email it to josh@paynehomeloans.com and I will walk through it with you.