Every lender uses the same Loan Estimate form, so the smartest way to shop is to put two of them side by side and compare the same lines.
The Loan Estimate at a glance
- Page 1: loan terms, payments, cash to close
- Page 2: closing cost details (A to J)
- Page 3: comparisons and other details
Page 1: the basics
- Loan Terms. Your loan amount, interest rate and monthly principal and interest. Each line says whether it can go up after closing. It also asks about a prepayment penalty (a fee for paying the loan off early) and a balloon payment (a large lump sum due at the end). For most standard home loans, both say “NO.” If either says “YES,” ask why.
- Projected Payments. Your monthly payment over time, including any mortgage insurance and estimated escrow for property taxes and homeowner’s insurance. Look at the total estimated monthly payment, not just principal and interest.
- Costs at Closing. Your estimated closing costs and your estimated cash to close, the amount you bring on closing day.
Page 2: closing cost details
| Section | What it shows |
|---|---|
| A. Origination Charges | What the lender charges to make the loan, including any points. This is the lender’s own price, and the best line to compare. |
| B. Services You Cannot Shop For | Services the lender picks, such as the appraisal and credit report. |
| C. Services You Can Shop For | Services you may choose yourself, such as title and settlement services. |
| D. Total Loan Costs | A + B + C. |
| E. Taxes and Other Government Fees | Recording fees and transfer taxes. |
| F. Prepaids | Things paid ahead, such as homeowner’s insurance and interest until your first payment. |
| G. Initial Escrow Payment at Closing | Money to start your escrow account for taxes and insurance. |
| H. Other | Other costs, such as HOA fees or owner’s title insurance. |
| I. Total Other Costs | E + F + G + H. |
| J. Total Closing Costs | D + I, minus any lender credits (money the lender puts toward your costs, usually in exchange for a higher rate). |
Below that, Calculating Cash to Close starts with your closing costs, adds your down payment and subtracts things like your earnest money deposit and any seller credits. The result is your estimated cash to close.
Page 3: comparisons and other details
- In 5 Years: how much you would pay in total over the first five years, and how much of your loan you would have paid off.
- Annual Percentage Rate (APR): your cost as a yearly rate, including interest and certain fees. It is usually higher than the interest rate.
- Total Interest Percentage (TIP): the total interest you would pay over the full loan term, as a percent of your loan amount.
- Other Considerations: notes on the appraisal, whether someone could take over (assume) the loan, homeowner’s insurance, late fees, refinancing and who will service your loan.
Signing page 3 only confirms that you received the form. It does not commit you to the loan.
How to compare two Loan Estimates
- Get them on the same day. Prices can change daily, so estimates from different days are not a fair match.
- Ask for the same loan. Same loan amount, loan type, term, down payment and rate-lock period.
- Compare section A first. It holds the lender’s own charges, including points.
- Then compare the APR and the In 5 Years total. They show the cost of the loan, not just the rate.
- Watch the guesses. A lower total can come from a low guess in sections B, C or F. Those are third-party estimates and may change.
Already have a Loan Estimate? You can share it on LoanFight’s compare your Loan Estimate page. We review it and, if it makes sense, connect you with a lending partner for another estimate to compare. The CFPB’s interactive Loan Estimate explainer also walks through each line.
Worked example: is paying a point worth it?
You get two example offers for the same $300,000 loan on the same day. These are illustrations, not quotes.
| Offer A | Offer B | |
|---|---|---|
| Points (in section A) | 0 | 1 point = 1% × $300,000 = $3,000 |
| Monthly principal and interest | Example payment | $55 less per month than Offer A |
Break-even: $3,000 ÷ $55 per month = 54.5, or about 55 months (about 4 years and 7 months).
If you expect to keep the loan longer than about 55 months, Offer B may cost less over time. If you might sell or refinance sooner, Offer A likely costs less. This simple math leaves out taxes and what else you could do with the $3,000.
What this means for you
Do not shop by interest rate alone. Get at least two Loan Estimates for the same loan on the same day, compare section A, the APR and the In 5 Years total, and ask the lender to explain any line you do not understand.
Mistakes to avoid
- Comparing only the interest rate.
- Comparing estimates from different days, or for different loan amounts or lock periods.
- Assuming the lowest total closing costs means the cheapest lender, without checking section A.
- Skipping a “YES” next to prepayment penalty or balloon payment without asking why.
- Thinking that signing the Loan Estimate locks you into the loan. It only confirms you got it.
- Ignoring the “Can this amount increase after closing?” answers on page 1.
Words to know
- Loan Estimate
- APR
- Discount points
- Lender credits
- Escrow account
- Closing costs
- Cash to close
- Prepayment penalty
See the full mortgage glossary →
Frequently asked questions
When will I get a Loan Estimate?
The lender must give it to you within three business days after it receives your application. An application includes six pieces of information: your name, income, Social Security number, the property address, an estimate of its value and the loan amount you want.
Does signing the Loan Estimate mean I accept the loan?
No. Signing only confirms that you received it. To move forward, you tell the lender you intend to proceed, and until then you can keep comparing other offers.
Why is the APR higher than the interest rate?
The APR includes the interest rate plus certain loan costs, such as points and some lender fees, spread over the loan term. It helps you compare the total cost of loans that have the same term.
Can the numbers on my Loan Estimate change?
Some can. The lender’s own charges generally cannot go up unless something changes, such as your loan amount, the property value or an expired rate lock. Estimates for third-party services and prepaids may change. Your Closing Disclosure shows the final numbers.
Sources
- CFPB: Loan Estimate explainer
- CFPB: Regulation Z § 1026.37 (content of the Loan Estimate)
- CFPB: Regulation Z § 1026.19 (Loan Estimate timing)
- CFPB: What is a balloon payment?
Educational information only, not an offer, approval or financial or legal advice. LoanFight is not a direct lender. Equal Housing Opportunity.
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