Loan Estimate

The Loan Estimate is a three-page form that lenders are required by federal law to send within three business days of receiving a complete mortgage application. The form is standardized (every lender's Loan Estimate has the same structure) which makes side-by-side comparison of competing offers possible.

How it works: page 1 shows the loan terms (amount, rate, monthly payment), the projected payment over time, the costs at closing, and the key dates. Page 2 itemizes the closing costs in three sections: Origination Charges, Services You Cannot Shop For, and Services You Can Shop For. Page 3 has totals, the APR and total interest percentage, a comparison block showing total costs over the first five years, and contact information. Federal rules cap how much certain costs can change between Loan Estimate and the eventual Closing Disclosure.

Why it matters: the Loan Estimate is the right document for comparing lenders. A borrower with three Loan Estimates from different lenders can compare them line by line, including the page-3 five-year total, which is often more useful than APR alone. Quotes that don't show up on a Loan Estimate (rate without points, payment without taxes, "out the door" cost without escrow setup) are usually not the same number.

Common gotcha: the Loan Estimate is binding on certain costs but not others. Lender origination charges, transfer taxes, and a few other items cannot increase between Loan Estimate and Closing Disclosure unless a "changed circumstance" triggers a redisclosure. Other items can change within limits. Reading both documents side-by-side at closing is how a borrower catches changes that should have been disclosed earlier.