Read your Loan Estimate.Know what you are choosing.
Find the payment, understand the fees, and compare offers with more confidence.
A worksheet and a Loan Estimate
have different jobs.
Early in your search, you may receive a fee worksheet. Once the lender has the information that triggers an official Loan Estimate, the standardized form helps you compare the loan’s terms and costs.
A fee worksheet
A preliminary view of possible rates, payments, and costs. It can be useful before you have a property or are ready to apply. Formats vary, so ask which fees and assumptions are included.
A Loan Estimate
A standardized three-page disclosure used for most home-purchase mortgages. It shows estimated terms, payments, closing costs, and cash to close. Receiving one does not mean the loan is approved or that you must accept it.
When should I receive an official Loan Estimate?
For covered mortgages, the lender must provide it within three business days after receiving your name, income, Social Security number, property address, estimated property value, and requested loan amount. A signed purchase contract is not required.
You do not have to provide verifying documents before receiving it. Except for a reasonable credit-report fee, other fees generally cannot be charged until you receive the Loan Estimate and indicate that you want to proceed.
What about prepayment penalties or balloon payments?
Page 1 identifies whether these features apply. If either is marked yes, ask your Loan Officer to explain the payoff terms and compare an alternative before deciding.
Can the numbers change after I receive it?
Some charges have limits on increases. Others, such as certain prepaids, can vary. A valid change in circumstances or a change you request can lead to a revised Loan Estimate. Ask what changed and why. An unlocked interest rate can also change.
Three pages. Three different jobs.
Choose a page, then select a line to see what it means and what to ask your Loan Officer. The example uses a $500,000 purchase with $100,000 down and a $400,000 loan.
Teaching example only. These are invented, internally consistent figures, not a current rate quote, client file, or official Loan Estimate.
Start with what you are borrowing, what you will pay each month, and what you need at closing.
A through D are loan costs. E through I are other costs. Section J combines the totals and subtracts lender credits.
Page 3 adds cost measures, contact details, and other loan features. Use them together with pages 1 and 2.
This walkthrough is simplified. For the actual form layout, open the CFPB’s interactive sample.
A lower rate can have a higher upfront cost.
Compare the same loan type, term, amount, lock period, and approach to points. Quotes from different dates may reflect different markets. Then consider how long you expect to keep the loan.
Fees you can compare
Look at origination charges in A, required services in B, and lender credits in J. Review services you can shop for in C too. A zero-dollar origination charge by itself does not prove a quote is better or worse.
Estimates to line up
Lower tax, insurance, prepaid, or escrow estimates do not automatically mean a less expensive loan. Ask whether the quotes use the same property details, insurance coverage, and closing date.
APR adds context. It does not make the decision for you. It includes certain finance charges over the loan term. Read it alongside fees, the payment, and your expected time in the loan. Be careful comparing different products, especially fixed-rate and adjustable-rate loans.
Find the five-year borrowing cost.
On page 3, subtract principal paid off from the total paid in five years. Enter the two figures from one Loan Estimate.
This excludes taxes, insurance, and other homeownership costs. For adjustable-rate loans, the disclosed five-year cost assumes the rate stays unchanged.
Put discount points in dollars.
One point equals 1% of the loan amount. The interest-rate reduction you receive for that cost varies.
Ask for a no-points option too, then compare the upfront difference with the monthly savings and how long you expect to keep the loan.
Bring these questions to the conversation.
You do not need to become a mortgage expert. You do need to understand the offer you are choosing.
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Have a quote in front of you?
A worksheet or a Loan Estimate gives us a starting point. We can help you identify what is included and what needs a closer look.
Sources and scope of this guide
This guide covers Loan Estimates for most closed-end home mortgages. Reverse mortgages, HELOCs, and some other transactions use different disclosures. Examples are educational, not offers to lend.