How to read a Loan Estimate, page by page

Page 1: loan terms, payments, and costs at closing

The top of page 1 identifies the applicant, property, loan term, purpose, product, and loan type, and shows whether the rate is locked and when the estimated closing costs expire. The Loan Terms table lists the loan amount, interest rate, and monthly principal and interest, and says whether each can increase after closing and whether the loan has a prepayment penalty or balloon payment. Projected Payments breaks the monthly payment into principal and interest, mortgage insurance, and estimated escrow, and notes which property costs are paid outside escrow. Costs at Closing shows the estimated closing costs and estimated cash to close.

• Confirm the loan amount, term, and loan type match what you requested.
• Note whether the rate is locked and when the estimated costs expire.
• Read each answer to whether an amount can increase after closing.

Page 2: closing cost details in sections A through J

Loan Costs covers origination charges (A), services you cannot shop for (B), and services you can shop for (C), totaled in D. Other Costs covers taxes and other government fees (E), prepaids (F), the initial escrow payment at closing (G), and other items (H), totaled in I. Section J adds D and I and subtracts any lender credits; the Calculating Cash to Close table then accounts for items such as the down payment, deposit, and seller credits. If the rate or payment can change, page 2 also includes tables that describe how and when.

Page 3: comparisons and other considerations

The Comparisons section shows In 5 Years—the total you would have paid in principal, interest, mortgage insurance, and loan costs, and how much principal you would have paid off—along with the annual percentage rate (APR) and the total interest percentage (TIP). The APR expresses your costs over the loan term as a rate and is not the same as your interest rate; the TIP shows total interest over the loan term as a percentage of the loan amount. Other Considerations covers topics such as appraisal, assumption, homeowner’s insurance, late payments, refinancing, and whether the lender intends to service the loan. Signing the form only confirms that you received it; it does not commit you to the loan.

Read the estimate as a set of assumptions

Several figures depend on assumptions, such as property taxes, homeowner’s insurance, and the cost of third-party services. Compare those assumptions with what you know about the property rather than treating every number as final. If a figure is unfamiliar, ask the lender which line it comes from and what it depends on. A difference from what you expected is a reason to ask; it is not by itself proof of an error.

Keep each estimate identifiable

Save each Loan Estimate with its issue date, especially if you receive a revised version. In Lighthouse, document analysis can read a Loan Estimate and keep its figures with your Home Profile for later comparison. Verify extracted amounts against the original form, and keep that lender’s latest applicable estimate available to compare with the Closing Disclosure.