Understanding Your Loan Estimate
Within three business days of your application, every lender must give you a Loan Estimate — a three-page form in a standardized layout, created so you can lay two offers side by side and compare them honestly. It is the single most powerful shopping tool you have, and most borrowers never read past page one.
Page one: the headline terms
The loan amount, interest rate, monthly principal and interest, and whether any of them can change. It also shows your estimated total monthly payment including taxes and insurance, and whether the loan has features like a prepayment penalty or a balloon payment.
Page two: the costs
This is where offers truly differ. It breaks out the lender’s own fees, the services you can and cannot shop for, and the prepaid taxes and insurance. Two lenders can quote the same rate and have very different page twos — which is exactly why you compare here, not just on the rate.
Page three: the comparisons
A few numbers designed for shopping: what you will have paid in five years, the APR, and the total interest percentage. Use these to compare the long-run cost of competing offers rather than the headline rate alone.
When you compare lenders, line up the page twos and the ‘cash to close’ figures, not just the rate. A low rate with high fees can cost more than a slightly higher rate with low fees. The standardized form exists so you can catch exactly that.