A Loan Estimate (LE) is the three-page federal form that shows what a specific mortgage will cost. A lender has to send it within three business days of receiving your application, and every lender uses the same layout, so two estimates can be laid side by side and compared line by line.
You've made an application, for this purpose, once you give a lender six things: your name, your income, your Social Security number, the property address, an estimate of the property's value and the loan amount you want. Before you have a contract, lenders usually give you a fee worksheet instead, since the property address is one of the six.
Page by page
Page 1 shows the loan amount, the interest rate, the monthly principal and interest, any mortgage insurance and escrow, and the estimated cash to close. It also says whether the rate is locked and until when.
Page 2 breaks out closing costs. Section A is the lender's own origination charges, including any discount points. Sections B and C are third-party services, split into ones you can't shop for and ones you can. Section E is taxes and government fees, where Florida's documentary stamp tax on the note and the intangible tax on the mortgage appear. Sections F through H cover prepaids, the initial escrow deposit and other costs.
Page 3 shows the APR, the total interest percentage (all the interest over the full term, as a share of the loan) and five-year cost figures that make two offers easier to weigh.
Which numbers can change before closing
Federal rules put each charge in one of three groups:
- Can't go up at all: the lender's fees, transfer taxes, and third-party services you weren't allowed to shop for.
- Can go up 10% in total: recording fees and third-party services you were allowed to shop for but picked from the lender's list.
- Can change: prepaid interest, homeowners insurance, escrow deposits, and services you shopped for on your own.
If a charge in the first two groups comes in over the limit, the lender refunds the difference. The limits reset only when the lender issues a revised Loan Estimate for a real change, such as a new loan amount or a rate you locked after the first estimate.
Checking two estimates against each other
Two lenders quote a $300,000, 30-year fixed loan at a 5.75% rate. Some lines should match on both:
- Principal and interest: $1,750.72 a month on each, since the rate and loan are the same
- Florida doc stamps on the note: $0.35 per $100 × $300,000 = $1,050
- Florida intangible tax: 0.2% × $300,000 = $600
- Taxes on the loan together: $1,650
The difference shows up in Section A. Lender 1 lists $1,895 in origination charges and Lender 2 lists $3,395. At the same rate, Lender 2 costs $1,500 more at closing for the identical loan. If one estimate shows a lower rate, check Section A for discount points, because a lower rate often comes with points that you pay up front.
Using your Loan Estimate
Hold on to it until closing, because the Closing Disclosure gets checked against it. Ask about any line you don't recognize before you agree to proceed.
Run the price, loan and fees through the cash to close calculator to see whether the estimate's cash to close looks right. For a Loan Estimate with real numbers on a home you're considering, call AAA Capital Funding at 888-601-8344.