Key Takeaways
This post is a 4 minute read.
A Loan Estimate is a standard three page form your lender must send soon after you apply.
Page one shows your rate, payment, and cash to close. Page two shows where every fee goes.
Section C lists services you can shop for, like title work, so do not skip it.
Some fees cannot rise at closing, and others can rise by only a set amount.
Put two Loan Estimates side by side and compare the same lines on each.
You open the email, see three pages of boxes and small print, and close it again. Most buyers do exactly that. It is a shame, because the Loan Estimate is the best tool you have for checking a lender's offer.
The form looks the same at every lender. That is the point. The federal government built it so you can compare offers line by line.
You should get one within three business days of applying. Your lender cannot ask you to commit before it arrives. If you have not seen one yet, ask your loan officer for it.
Page One: The Five Minute Check
Start at the top of page one. Confirm the loan amount, the interest rate, and the loan type. A typo here can ripple through every other number.
Next, find the monthly payment box. It shows principal and interest, plus a line for mortgage insurance and estimated escrow. Principal is what you borrow. Interest is what the lender charges.
Check whether the rate is fixed or adjustable. Then read the three yes-or-no questions about your rate, your payment, and a prepayment penalty. Any "yes" deserves a conversation.
At the bottom of page one sits the line most buyers care about, the estimated cash to close. That is your down payment plus closing costs, minus any credits.
Page Two: Where the Closing Costs Hide
Page two is a list of fees sorted into lettered sections. Section A holds the lender's own charges, such as origination and underwriting. Compare this section first, because it shows what the lender itself charges.
Section E holds government fees. In Alabama, that includes a mortgage recording tax of 15 cents per $100 borrowed. On a $250,000 loan, that is $375. Georgia charges its own intangible recording tax on the loan instead.
Sections F and G hold prepaid items and your starting escrow deposit. Those cover things like homeowners insurance and property taxes. If escrow is new to you, our guide to the escrow account explains how it works.
Section J adds everything up. It is your total closing costs. Our overview of closing costs shows what each fee means in plain terms.
The Boxes You Are Allowed to Shop
Look at Section B and Section C. Section B lists services the lender picked for you, and you cannot shop for them. Section C lists services you can shop for, and this is where buyers save real money.
Title work and settlement services usually land in Section C. Your lender must give you a written list of providers. You can choose from that list or ask about another company.
Lake Martin buyers often use a title company in Dadeville or Alexander City, close to the courthouse in Tallapoosa County. A local office may quote differently than one in Birmingham. A few phone calls can pay off.
Which Fees Can Change Before Closing
The estimate is not a guess you can ignore. Federal rules limit how far some fees can rise between the Loan Estimate and closing.
Lender charges and transfer taxes cannot go up at all. Recording fees and services you chose from the lender's list can rise by no more than 10 percent combined. Other items, like insurance and the escrow deposit, can move more.
There are exceptions. A real change in your situation can allow a revised estimate. A late change to the loan, a new appraisal value, or a delay can all trigger one.
Estimated costs generally stay valid for at least 10 business days. A rate lock is a separate promise from your lender. Ask whether yours is locked and for how long.
Page Three: Compare Two Offers Fairly
Page three is built for comparing. It shows total costs over five years and the annual percentage rate, or APR. The APR spreads some fees across the loan so you can see its yearly cost.
Get two or three Loan Estimates on the same day if you can. Rates move daily, so a fair comparison needs similar timing. Match the loan type, loan amount, and down payment too.
Then compare the same lines on each form. Look at Section A, the cash to close, and the monthly payment. Do not let one low rate hide a high fee.
Be careful with lender credits. A credit can lower your cash to close, but it often comes with a higher rate. Ask how each credit is paid for.
What Happens When the Closing Disclosure Arrives
Before closing, you will receive a second form called the Closing Disclosure. It must reach you at least three business days before you close. It looks much like the Loan Estimate and holds the final numbers.
Lay the two forms next to each other. Check the loan amount, rate, and cash to close first. Then walk down the lettered sections and flag anything that grew.
Call your loan officer about any surprise before closing day, not at the table. A big change in the APR or the loan product can restart the three day clock. Taking a day to fix it beats signing something wrong.
If you are still early in the process, a pre-approval is a good place to start. It gets you real numbers to compare. Breeze Mortgage is happy to walk through your Loan Estimate with you, line by line, at no pressure.
Frequently Asked Questions
When do I get a Loan Estimate?
Your lender must send one within three business days after you submit a loan application. The application includes your name, income, Social Security number, property address, estimated value, and loan amount.
Does getting a Loan Estimate mean I have been approved?
No. It is a cost disclosure, not an approval. Underwriting still has to review your income, credit, assets, and the property.
Can I use a title company that is not on my lender's list?
Often yes, for services in Section C. Ask your lender first. Fees from a company outside the list can fall outside the 10 percent limit.
Which closing costs can go up between the Loan Estimate and closing?
Lender charges and transfer taxes cannot rise. Recording fees and listed services can rise up to 10 percent combined. Insurance and escrow deposits can change more.
What if my Closing Disclosure looks different from my Loan Estimate?
Some changes are allowed, and some are not. Ask your loan officer to explain each difference before closing day.
Do I pay anything to get a Loan Estimate?
Before you tell a lender you want to proceed, it can charge only a credit report fee. Ask your loan officer about it up front.
Trey Foshee NMLS #2654005 | Hunter McBride NMLS #2674392 | Joe Taunton NMLS #953010
Breeze Mortgage is powered by Edge Home Finance, LLC. NMLS #891464. Equal Housing Opportunity. This content is for informational purposes only and is not a commitment to lend. All loans are subject to credit approval, underwriting guidelines, and property eligibility requirements. Down payment assistance programs, availability, eligibility requirements, and funding are subject to change without notice. Contact Breeze Mortgage for current program details and to determine what options may be available for your specific situation.
