📄 Section 1
Two Documents.
One Protects You.
One Doesn't.
When you start shopping for a mortgage, lenders will send you documents that look like quotes. But not all of them are the same. Some are official and protected by federal law. Others are just a piece of paper with numbers — and the lender can change those numbers anytime. Knowing which is which could save you a lot of money.
✓ Federally Regulated
The Loan Estimate (LE)
This is the official document. Every lender — by law — must give you one within 3 business days after you apply. It's always 3 pages and always in the same format, no matter which lender you use. That means you can compare one lender's Loan Estimate to another's and know you're looking at the same information. The numbers on it are legally protected. The lender can't just change them at closing.
⚠ No Rules Apply
The Fee Worksheet / Initial Fees Worksheet
This is just a piece of paper. There are no rules about what has to be on it. Every lender can design it however they want and call it whatever they want — "Preliminary Quote," "Fee Sheet," "Loan Summary," anything. Some lenders are honest and include everything. Others leave out costs on purpose to make their quote look lower than a competitor's. You have no legal protection based on what a fee worksheet says.
The Bait and Switch
Here's how it works. A lender shows you a worksheet with a really low closing cost number. You choose them because they look cheapest. Then, when you get the real Loan Estimate — or worse, when you're at the closing table — the real fees show up. By then, you've already paid for an appraisal and spent weeks in the process. It feels too late to back out. Here are the most common tricks:
- Leaving out the lender's own fees entirely — only showing what third parties charge
- Rolling the lender fee into the loan amount so it doesn't appear in closing costs
- Not including prepaid costs like insurance and taxes — those add thousands
- Advertising a low rate but hiding the "points" (fees) you pay to get that rate
- Not mentioning the VA Funding Fee — a cost specific to VA loans worth $8,000–$12,000+
- Using a different purchase price or loan amount than what you actually discussed
Here's what to do: Ask every lender you're considering to give you a formal Loan Estimate. Not a worksheet — the actual Loan Estimate. Since all Loan Estimates use the same format, you can put two side by side and compare line by line. If a lender says they won't give you a Loan Estimate until you've made a decision or paid a fee — that's a warning sign. Walk away.
| Feature | ✅ Loan Estimate | ⚠ Fee Worksheet |
|---|---|---|
| Required by law | Yes — TRID / RESPA | No |
| Standardized format | Yes — identical at every lender | No — each lender designs their own |
| Fees legally binding | Yes — within CFPB tolerances | No — purely informational |
| Must include ALL fees | Yes — lender costs, third-party, prepaids, escrow | Sometimes — lender's discretion |
| Can be used to compare lenders | Yes — apple-to-apple comparison | Unreliable — different formats hide different things |
| Issued when | Within 3 business days of applicationLender needs your name, income, SSN, property address, estimated value, and loan amount | Anytime — often used before applicationLender can send it anytime — before or after application |
| Good for | Making final lender decisions | Getting a rough ballpark only |
📄 Section 2
Page 1 of the Loan Estimate:
The Big Numbers
Page 1 is your overview. Think of it like the summary at the top of a bill — it shows your loan amount, your interest rate, what your monthly payment will be, and how much you'll need at closing. If something on page 1 doesn't look right, stop and ask before going any further.
Real Example — VA Purchase Loan, Tooele County UT
Here's what Page 1 looks like in the real world
$495,427
Loan Amount
The home costs $485,000 but the loan is higher because a $10,427 VA fee was rolled into it
5.750%
Interest Rate
This rate is locked in for life — it will never go up
$2,891
Monthly P&I
This is just the loan repayment — taxes and insurance are added on top
$3,265
Estimated Total Monthly
The real monthly number — includes loan payment plus taxes and insurance
$20,634
Estimated Closing Costs
All fees added up — but seller credits will reduce this
–$154
Cash to Close
A negative number means you actually get money back at closing
Loan Terms Section — What to Check
Page 1 — Top
Loan Amount
e.g. $495,427
Watch ThisDoes this match what you asked to borrow?
The loan amount is how much money you're borrowing. On most loans, it equals the purchase price minus your down payment. But sometimes it's higher. On VA loans, for example, a fee called the VA Funding Fee can be rolled into the loan — so the loan amount ends up bigger than the purchase price. That's allowed and normal for VA loans, but you should know about it before you see it here.
Real example: This home cost $485,000. The buyer put $0 down (VA loan). The loan is $495,427 because $10,427 in VA Funding Fee was added into it. If you don't know why your loan amount is higher than the purchase price — ask your lender before moving forward.
Interest Rate
e.g. 5.750%
Always CheckIs this the rate you were told you'd get?
Your interest rate is the percentage the bank charges you each year to lend you the money. The lower it is, the less your payment will be. Check two things: First, is this the same rate the lender quoted you? Second, is the rate locked? If the Loan Estimate says "Rate Lock: NO," your rate could still go up or down before closing. Ask your lender when they will lock it in.
Watch out: If the rate on the Loan Estimate is higher than what the lender's fee worksheet showed you — ask why immediately. It could mean their original quote required extra fees to get that rate.
Monthly Principal & Interest
e.g. $2,891.18
Always CheckThis is only PART of what you'll pay each month
P&I stands for Principal and Interest. Principal is the amount that goes toward paying down what you borrowed. Interest is the lender's fee for lending it to you. Together they make up the base loan payment. But your actual monthly payment will be higher. You also pay property taxes, homeowner's insurance, and sometimes HOA dues and mortgage insurance — all through your mortgage payment. Scroll down on the Loan Estimate to find the "Estimated Total Monthly Payment" — that's the real number to budget for.
Prepayment Penalty
Should say NO
Danger If YESThis should almost always say NO
A prepayment penalty means the lender charges you a fee if you pay off your loan early — like if you sell your house or refinance. Think of it like a cancellation fee. Most normal home loans (VA, FHA, conventional) do not have this. If it says YES on your Loan Estimate, ask why and what the fee would be. Do not accept a prepayment penalty without understanding exactly what it costs you.
Balloon Payment
Should say NO
Danger If YESThis should always say NO on a normal home loan
A balloon payment is when the entire remaining balance of your loan becomes due all at once on a specific date — even though you've been making normal monthly payments. For example, imagine a 30-year loan where the full balance is due after only 7 years. If you can't pay it or refinance in time, you could lose your home. Standard home loans (VA, FHA, conventional) never have this. If it says YES, ask a lot of questions before proceeding.
Projected Payments — Your Real Monthly Cost
Page 1 — Middle
Estimated Total Monthly Payment
e.g. $3,265
Key NumberThis is the number you'll actually write a check for each month
This is what you're going to pay every single month — not just the loan part, but everything. On this VA loan example: $2,891 loan payment + $0 mortgage insurance + $373 for taxes and insurance = $3,265 per month total. Keep in mind that taxes and insurance can go up a little each year, so your payment may adjust slightly over time.
Heads up on this real example: The lender's fee worksheet showed $3,314.51/month — but the official Loan Estimate showed $3,265. The difference? The worksheet included $50/month for HOA dues. Always double-check that your worksheet and Loan Estimate show the same monthly payment. If they're different — ask why.
Estimated Taxes, Insurance & Assessments
e.g. $423/mo
Watch ThisCheck the "In escrow?" column carefully
An escrow account is a separate account your lender manages. Each month, part of your mortgage payment goes into escrow. The lender then uses that money to pay your property taxes and homeowner's insurance when they come due. If something says "In escrow? YES" — it's taken care of for you. If it says "In escrow? NO" — you have to pay that bill yourself on top of your mortgage payment. Some lenders leave HOA dues out of escrow, which makes their quoted payment look cheaper on paper but leaves you with an extra bill every month.
Costs at Closing — The Big Picture
Page 1 — Bottom
Estimated Closing Costs
e.g. $20,634
Watch ThisThe total of everything — before credits lower it
Closing costs are all the fees and expenses you pay to get the loan and transfer ownership of the home. This number includes the lender's fees, third-party fees (like the title company and appraiser), taxes, and upfront costs for insurance and your escrow account. It's the full bill before any credits are subtracted. On this example: $16,110 in loan-related costs + $4,524 in other costs = $20,634. This is the number lenders most often manipulate on their fee worksheets — by leaving out entire categories to make it look smaller.
Estimated Cash to Close
e.g. –$154
Bottom LineWhat you actually need on closing day
This is the most important number on page 1. It's how much money you need to bring to the closing table — either as a wire transfer or cashier's check. It takes the total closing costs, subtracts your down payment credit, any seller credits, and any lender credits. If the number is negative (like –$154), that means the credits are actually MORE than the costs — so the lender or title company would give you that money at closing.
How this example works: Total costs were $20,497. But $10,427 of fees were rolled into the loan, the seller paid $9,500 of closing costs, and there were $724 in other credits. Do the math: $20,497 – $10,427 – $9,500 – $724 = –$154. The buyer receives $154 at closing. That's the power of negotiating seller credits on a VA loan.
📄 Section 3
Page 2 of the Loan Estimate:
Every Fee, Line by Line
Page 2 lists every single cost broken out by category. It's the most detailed page and most buyers skip right over it. But this is where you'll find hidden fees — or discover that a lender left something out of their original quote. Take 5 minutes to read it. Every category is explained below.
Section A — Origination Charges
Lender Profit
Origination Charges
e.g. $2,157
Negotiate ThisThis is the lender's fee for making your loan
Section A is how the lender gets paid. It includes the origination fee (sometimes called a loan fee or processing fee) and "points." Points are optional upfront payments that lower your interest rate — paying 1 point costs 1% of the loan amount and typically lowers the rate by about 0.25%. On this example loan, the fee is $2,157 (0.435% of $495,427). Of all the fees on the Loan Estimate, Section A is the most negotiable. You can ask the lender to reduce or waive it.
Something to watch for: If a lender's fee worksheet shows $0 in origination but their rate is the same as a competitor who charges $2,000 — something's off. Lenders always get paid. If you don't see a fee in Section A, look at the interest rate. They may be making their money through a higher rate instead.
Section B — Services You Cannot Shop For
Fixed Costs
Services You Cannot Shop For
e.g. $11,357
Verify AmountsYou can't choose these vendors, but amounts can vary by lender
These are fees for services the lender requires but selects themselves — like having your credit pulled, getting a flood zone certificate, or the appraisal. You don't get to shop around for these. On VA loans, the VA Funding Fee is by far the biggest item in this section. It's a one-time fee charged by the Department of Veterans Affairs (not the lender). For a first-time VA buyer with 0% down, it's 2.15% of the loan — that's $10,427 on a $485,000 home. It's almost always rolled into the loan so you don't pay it out of pocket.
Are you exempt from the VA Funding Fee? Veterans who receive VA disability compensation, surviving spouses, and certain other veterans don't have to pay it. Always ask your loan officer if you might qualify for an exemption — it could save you thousands.
Section C — Services You CAN Shop For
Your Choice
Services You Can Shop For
e.g. $2,596
Shop AroundYou can shop around for these services and potentially save money
This is the one section where you have a choice. The lender lists their preferred vendors — but you're allowed to pick your own for title insurance, the closing/settlement agent, the title search, pest inspection, and home inspection. Getting competing quotes from even one or two title companies can save you several hundred dollars. On this example: title insurance was $1,916, settlement fee was $400, and a few smaller fees totaled $2,596 combined.
Quick note on title insurance: There are two types — one that protects the lender and one that protects you. The lender's policy is required. An owner's policy (which protects you if someone disputes ownership of the home) is optional but often worth having. Ask your loan officer or title company about it.
Sections F & G — Prepaids & Initial Escrow
Often Hidden on Worksheets
Prepaids (F)
e.g. $2,157
Often OmittedCosts you pay upfront that cover future expenses
Prepaids are real money you pay at closing for things that happen right after closing. The two biggest ones: your first full year of homeowner's insurance paid upfront (on this example, $1,455), and prepaid interest. Prepaid interest covers the days between closing and the end of that month — on this loan it was $78.05 per day for 9 days = $702. These add up to thousands of dollars and are one of the most common things lenders leave off their initial fee worksheets to make their quote look cheaper than it really is.
Initial Escrow Payment (G)
e.g. $1,876
Often OmittedA deposit into your escrow account to get it started
Remember how your escrow account pays your taxes and insurance each month? Well, it needs money in it before those first bills arrive. So at closing, you deposit a few months' worth upfront. On this loan: 3 months of insurance ($364) + 6 months of property taxes ($1,512) = $1,876 deposited at closing. This money is not lost — it sits in your escrow account and gets used for your actual tax and insurance bills. But it is real money you need at closing, and it's another cost that often gets left off informal fee worksheets.
How to spot an incomplete quote: Add up Sections A + B + C on the Loan Estimate. If that matches what the lender quoted you on their worksheet — they left out Sections F and G. That's roughly $4,000 missing from their quote on this example loan. Always ask: "Does your quote include prepaids and initial escrow?"
Calculating Cash to Close — The Full Picture
Bottom of Page 2
Cash to Close Calculation
The math explained
Read ThisA line-by-line breakdown of how the cash-to-close number was calculated
This table is like a receipt — it shows every dollar going in and out. Here's how to read it:
Total Closing Costs: $20,497 — the full bill
Closing Costs Financed: –$10,427 — the VA fee was rolled into the loan, so you don't pay it at closing
Down Payment: $0 — VA loans allow 0% down
Seller Credits: –$9,500 — the seller agreed to pay this much of your closing costs
Adjustments: –$724 — credits for taxes already paid by the seller, etc.
Cash to Close = –$154 — you get money back
Total Closing Costs: $20,497 — the full bill
Closing Costs Financed: –$10,427 — the VA fee was rolled into the loan, so you don't pay it at closing
Down Payment: $0 — VA loans allow 0% down
Seller Credits: –$9,500 — the seller agreed to pay this much of your closing costs
Adjustments: –$724 — credits for taxes already paid by the seller, etc.
Cash to Close = –$154 — you get money back
What this example shows: With smart negotiation, this VA buyer not only needed zero down payment — they actually walked away from the closing table with $154 in their pocket. That's what's possible when you use VA benefits the right way.
📄 Section 4
Page 3 of the Loan Estimate:
The Long-Term Picture
Page 3 shows you how the loan performs over time — not just today. This is the page to look at when comparing two loans that have different rates and fees. The numbers here tell you which loan is really cheaper in the long run.
Comparisons Section — The Real Cost Metrics
Page 3 — Top
In 5 Years
$190,283 paid / $35,858 principal
Reality CheckA reality check on how your money is being spent
In 5 years on this loan, you'll have sent $190,283 to the lender. But only $35,858 of that went toward paying down what you borrowed. The rest was interest and fees. This isn't a problem — it's just how mortgages work. Early payments are mostly interest. But this number is useful for comparing loans. If two lenders quote different rates and fees, this "In 5 Years" number helps you see which one you'll actually have paid less to — especially if you plan to sell or refinance within 5–7 years.
Annual Percentage Rate (APR)
e.g. 6.049%
Compare ThisA better number than the interest rate for comparing lenders
The interest rate tells you the cost of borrowing. The APR (Annual Percentage Rate) tells you the cost of the loan including the lender's fees. It's always a little higher than the interest rate. On this loan: 5.750% interest rate, 6.049% APR. The 0.3% difference comes from the origination fee and other costs. When comparing two lenders, look at the APR — not just the rate. A lender with a lower rate but high fees might have a higher APR than a lender with a slightly higher rate and low fees.
Simple example: Lender A quotes 5.75% rate, 6.1% APR. Lender B quotes 5.875% rate, 6.0% APR. Lender B looks more expensive by rate — but the APR tells you Lender B is actually the cheaper loan once fees are included. APR is your best tool for comparing loans side by side.
Total Interest Percentage (TIP)
e.g. 110.23%
Eye OpenerThis number might surprise you — it's supposed to
TIP stands for Total Interest Percentage. It's the total amount of interest you'd pay over the full life of the loan, expressed as a percentage of what you borrowed. On this loan it's 110.23%. That means if you kept this loan for all 30 years, you'd pay over $546,000 in interest alone on a $495,000 loan. That's not a mistake or a scam — it's just how long-term loans work. Interest adds up over decades. The point of this number is to compare loans. A lender with a slightly higher rate might have a TIP that's 5% higher — meaning you'd pay tens of thousands more over 30 years.
The take-away: The longer you plan to keep the loan, the more the interest rate matters. Even 0.25% difference in rate can mean $20,000+ in interest over 30 years. The TIP makes that visible.
Other Considerations — Don't Skip This
Page 3 — Bottom
Assumption
Can someone take over this loan?
VA Buyers: ReadA hidden perk of VA loans that most people don't know about
Loan assumption means someone else can take over your loan when you sell — including your original interest rate. Most home loans don't allow this. But VA loans do. Here's why that matters: if today's rates are 5.75% and rates rise to 8% in 5 years, your home becomes extremely attractive to buyers. They can take over your 5.75% loan instead of getting a new 8% one. That could make your home sell faster and for more money. On the Loan Estimate, this section should say the lender "will allow assumption." If it says "will not allow" — you've lost that benefit.
Servicing
Who will collect your payments?
Good to KnowThe company you pay each month might not be the company that gave you the loan
Most lenders sell your loan to another company after closing. That other company then collects your monthly payments. This is called "transferring servicing" and it happens all the time. Your rate, payment, and loan terms never change. The only difference is where you send your payment. If your loan is transferred, you'll get a letter in the mail explaining who the new payment goes to and how to set it up. This is totally normal and nothing to worry about.
🚨 Section 5
Red Flags:
What Dishonest Lenders Do
Most loan officers are honest. But the mortgage industry has enough bad actors that you need to know what to watch for. When a quote looks surprisingly cheap compared to everyone else — here's what might be going on behind the numbers.
The "No Fees" Trick
You've probably seen ads that say "no closing costs" or "we don't charge lender fees." Here's the truth: lenders always get paid. If you don't see a fee somewhere — it's hidden somewhere else. These are the most common ways:
- They give you a higher interest rate. You don't pay upfront — but you pay more every month for 30 years
- They rename their fee. "Origination fee" becomes "underwriting fee" or "processing fee" — same charge, different label
- They roll the fee into your loan balance. Your cash to close looks low but you're borrowing more money
- They charge more for third-party services (like title insurance) to make up the difference
The Incomplete Quote
This is the most common trick. A lender shows you $8,000 in closing costs. Another lender shows $14,000. You choose the $8,000 one — but you're not comparing the same thing. Here's what the $8,000 quote probably left out:
- Prepaids — the upfront insurance premium and prepaid interest (usually $1,500–$2,500)
- The initial escrow deposit — months of taxes and insurance collected at closing (usually $1,500–$2,500)
- Title insurance and settlement fees — often listed as "TBD" (to be determined)
- Home inspection, pest inspection, and other required services
- Their own origination fee — sometimes hidden under a different name or in a different section
How to protect yourself: Get a formal Loan Estimate from every lender you're seriously considering. Then compare them section by section — not just the bottom line. Check Section A (lender fees), Section F (prepaids), and Section G (escrow) on each one. If a lender shows $0 in Section A but their rate is higher — they're making their money through the rate instead. That may or may not be the better deal for you, depending on how long you keep the loan.
✅ Section 6
Your Loan Estimate
Review Checklist
When a lender sends you a Loan Estimate, print it out or open it on your screen and go through this list. You don't need to understand every number perfectly — you just need to know what to look for and what questions to ask. Takes about 15 minutes.
- Your name is spelled correctly and the property address is right. Mistakes here can slow down or complicate your closing. Double-check both.
- The loan amount is what you expected. If it's higher than the purchase price, ask why. On VA loans, it's often because the VA Funding Fee was rolled in — but confirm that's the case.
- The interest rate matches what the lender quoted you. Also check: does it say "Rate Lock: YES"? If it says NO, your rate could change before closing. Ask when it will be locked.
- Prepayment Penalty says NO. If it says YES, you could be charged a fee for paying off your loan early — like if you sell or refinance. Stop and ask questions before moving forward.
- Balloon Payment says NO. If it says YES, there is a date in the future when your entire remaining loan balance comes due all at once. This is not a normal home loan. Understand it completely before proceeding.
- The Estimated Total Monthly Payment is what you can actually afford. Make sure it includes taxes, insurance, HOA (if any), and mortgage insurance — not just the loan repayment portion.
- Check Section A on Page 2. If the lender told you they have "no fees," Section A should show $0. If there's a number there — ask what changed.
- Ask the lender: "Were prepaids and initial escrow included in your original quote?" These are Sections F and G on Page 2. They add several thousand dollars. If the lender's original worksheet didn't include them — the actual cost is higher than they showed you.
- Seller credits match your purchase contract. If the seller agreed to pay $9,500 of your closing costs — that exact number should appear in the "Calculating Cash to Close" section on Page 2.
- The rate lock expiration date is after your closing date. If your closing is April 15 and your lock expires April 10 — the rate is no longer guaranteed. This needs to be caught and fixed well before closing.
- Compare APR across lenders, not just the interest rate. APR includes the lender's fees. A lower APR means a cheaper loan overall — even if the interest rate is slightly higher.
- Get Loan Estimates from at least 2 lenders before deciding. You can't truly compare lenders using fee worksheets — the formats are too different. With two official Loan Estimates, you can compare every section line by line and see exactly who is offering the better deal.
Have Questions About Your Loan Estimate?
We'll sit down and walk through every line with you — no pressure, no obligation, no rush. As a veteran-owned mortgage broker, we work for you — not the bank. We shop your loan with multiple lenders so you can compare real Loan Estimates side by side and make a confident decision.