Quick answer
A Loan Estimate is a standard 3-page form your lender must give you within 3 business days of your mortgage application.
- Page 1: loan amount, rate, monthly payment, whether anything can change after closing, and your estimated cash to close.
- Page 2: every closing cost, line by line (Sections A–J). Section A is the lender's own fee, and the easiest to compare between lenders.
- Page 3: comparisons (what you'll pay in 5 years, APR, total interest) and other terms.
How long is it good for? The estimated closing costs must be honored for at least 10 business days. Check the "Closing costs expire" date on page 1. Your rate is only guaranteed if the Rate Lock line says YES.
How the Loan Term Is Written
The "Loan Term" on page 1 follows a federal rule (CFPB official interpretation of 12 CFR 1026.37(a)(8)):
| Loan term | How it's shown |
|---|---|
| 360 months | 30 years |
| 25 months | 2 yr. 1 mo. |
| 185 months | 15 yr. 5 mo. |
| 16 months | 16 mo. |
| 12 months | 1 year |
The rule: terms of 24 months or more that aren't whole years are shown as years plus months ("yr." and "mo."). Terms under 24 months that aren't whole years are shown in months only. Source: CFPB official interpretation.
Within 3 business days of submitting a mortgage application, your lender is legally required to give you a Loan Estimate (LE). It's a standardized 3-page form that discloses your projected loan terms, monthly payment, and closing costs. Most buyers skim it or ignore it entirely — which is a mistake. The LE is one of your most powerful tools for comparison-shopping and catching lender errors before closing.
Here's every section, explained plainly.
Page 1: Loan Terms & Projected Payments
Loan Terms Box (Top Right)
- Loan Amount: The amount you're borrowing (purchase price minus down payment)
- Interest Rate: Your locked or quoted rate — check if it says "YES" or "NO" under "Can this amount increase after closing?" It should say NO for a fixed-rate loan
- Monthly Principal & Interest: Your base payment, excluding taxes and insurance
- Prepayment Penalty: Should be "NO" for conventional, FHA, VA, USDA
- Balloon Payment: Should be "NO" for standard 30-year mortgages
Projected Payments Section
This breaks out your estimated total monthly payment:
- Principal & Interest: the loan payment
- Mortgage Insurance: PMI or MIP if applicable — note when/if it can be canceled
- Estimated Escrow: property taxes + homeowner's insurance (average monthly reserve)
- Estimated Total Monthly Payment: all four combined
What to check: Compare this number to what the lender quoted verbally. Also confirm whether estimated taxes and insurance are realistic for the area.
Estimated Taxes, Insurance & Assessments
Lenders sometimes underestimate property taxes (especially in Texas, Illinois, or high-tax areas) or use low insurance estimates. Always verify against actual tax records and get your own insurance quote before closing.
Page 1 (Lower): Costs at Closing
Two key numbers:
- Estimated Closing Costs: all origination, service, and prepaid fees
- Estimated Cash to Close: closing costs + down payment - any seller credits or lender credits
This is the number you need to have in your bank account at closing.
Page 2: Loan Costs & Other Costs (The Detail)
Section A: Origination Charges
- Origination fee: lender's base charge for processing your loan (typically 0–1% of loan amount)
- Discount points: prepaid interest to buy down your rate (1 point = 1% of loan); should clearly show how many points and what rate reduction they purchase
- Application fee: most lenders don't charge these separately; if you see one, question it
Compare Section A across lenders — this is where broker vs. bank pricing differences show up most clearly.
Section B: Services You Cannot Shop For
Fees for services required by the lender where you can't choose the provider:
- Appraisal fee ($500–$800 typical)
- Credit report ($25–$75)
- Flood determination ($15–$30)
- Tax monitoring service
These are relatively standard. Minor variation across lenders is normal.
Section C: Services You Can Shop For
- Title insurance (owner's and lender's policy)
- Settlement/closing fee
- Survey (if required)
- Attorney fees (FL — some counties use closing attorneys)
You can choose your own title company or closing attorney for these services. Getting competing title quotes can save $500–$1,500.
Section E: Taxes and Government Fees
- Recording fees: county recorder charge to record the deed and mortgage
- Transfer taxes: some states/counties charge transfer taxes on sales (Florida has documentary stamp tax; Colorado has minimal transfer tax)
Section F: Prepaids
Not really "costs" — you're prepaying items that will sit in escrow:
- Homeowner's insurance premium: 12 months paid upfront at closing
- Mortgage interest: interest for the days between closing and the end of the month (prorated)
- Property taxes: prorated
Section G: Initial Escrow Payment at Closing
- 2–3 months of property taxes and insurance deposited into your escrow account as a cushion
Section H: Other
Miscellaneous fees: HOA transfer, home warranty (if applicable), homebuyer counseling (required for some programs)
Page 3: Comparisons & Other Considerations
Comparisons Section
- APR: annual percentage rate — includes origination fees and points in the effective rate. Better for comparing total cost than the interest rate alone
- Total Interest Percentage (TIP): the total interest you'd pay over the life of the loan as a percentage of the loan amount — eye-opening on long amortizations
- Annual Percentage Rate: use this to compare Loan Estimates from different lenders on an apples-to-apples basis
Other Considerations
- Appraisal: disclosure of your right to a copy of the appraisal
- Assumption: whether someone can take over your loan (most conventional loans are not assumable; VA loans are)
- Homeowner's insurance: lender's requirement; you must maintain it
- Late payment: how many days grace period and what the late fee is
- Refinance: lender's boilerplate — not a binding promise
- Servicing: "We intend to service your loan" or "We may assign/sell your loan" — informs who you'll make payments to
How to Compare Loan Estimates From Multiple Lenders
- Make sure all LEs quote the same loan amount, loan type, and term
- Compare Section A (origination) — this is where lender profit varies most
- Compare APR (line 3a in comparisons section) for total cost comparison
- Check estimated cash to close — factor in any lender credits
- Note the rate lock expiration — you want at least 30–45 days
Common Errors to Watch For
- Underestimated property taxes — lenders sometimes use prior-year assessed value; get the current tax bill
- Missing HOA dues in the payment projection
- Inflated origination fees that weren't disclosed in initial conversations
- Points without clear rate reduction — make sure you know what each point is buying
FAQ
Is a Loan Estimate a binding commitment? No — it's an estimate. Your final costs appear on the Closing Disclosure (CD) 3 business days before closing. Certain fees cannot increase (Section A origination charges, Section B services), but others can change.
What if my Loan Estimate looks wrong? Call your loan officer immediately and ask for a corrected LE.
Should I get multiple Loan Estimates? Absolutely — especially from a mortgage broker who can shop multiple lenders simultaneously.
How long is a Loan Estimate valid? It's good for 10 business days from the issue date. After that, the lender can change the terms.
Want Help Comparing Loan Estimates?
I'll review any Loan Estimate you've received and explain exactly what you're looking at — no obligation.
📞 970-708-9624 | tj@taytoncapitalllc.com
Get Pre-Approved → | Contact Tayton Capital
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