Shopping for a mortgage can be confusing and overwhelming, and that’s why lenders now are required to provide a standardized loan estimate (LE) form. The streamlined three-page form lists the estimated terms and costs of the loan so you can understand your expected costs at closing and over the life of the loan.
Here’s a closer look at what the loan estimate includes, a line-by-line explanation of the various line items you’ll find on these forms and how to compare different mortgage loan offers.
- Lenders must provide a loan estimate once they receive enough information to consider it a mortgage application under federal rules.
- Lenders are required to provide loan estimates within three business days of receiving a borrower’s mortgage application.
- Loan estimates detail all the costs, terms and borrowing details of your new mortgage loan.
- Experts recommend shopping for a mortgage before you start your home search so you know exactly how much house you can afford and what size loan you qualify for.
What Is A Loan Estimate?
A mortgage loan estimate is a three-page form lenders must provide to borrowers after they apply for a mortgage. The standardized document lists the terms, costs and other details of a home loan. Lenders are required to deliver an LE form within three business days after receiving a borrower’s mortgage application, according to the Consumer Financial Protection Bureau.
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How To Get A Loan Estimate (And Why You Need More Than One)
To get preapproved, lenders typically require a mortgage application and documentation of your income, assets and credit history. Compare loan rates and terms with at least three different lenders (or work with a mortgage broker who can do the legwork for you). Freddie Mac research has found that borrowers who obtain one more quote could save an average of $1,500 over the life of their loan, while five additional quotes may result in saving an average of around $3,000.
Getting several loan estimates ensures you choose the best mortgage for your needs at the lowest rates possible. But you won’t know that unless you shop around, says Nicole Rueth, branch leader with Movement Mortgage in Englewood, Colorado.
“Ask each lender to go through it with you, so that you get a clearer picture,” Rueth says. “By the time that you’ve reviewed four loan estimates, you’re going to have a very clear understanding of what each one of the buckets are and what you can expect at the closing table.”
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How To Read Your Loan Estimate Page By Page
Loan estimates are fairly straightforward, but some of the terminology and fees listed might be new to you. Here’s a deeper dive into what you’ll see.
Page 1: The Overview
The first page of your loan estimate delivers key borrowing data at a glance.
In the top left corner, you’ll see the date the loan estimate was issued, your name and current address, target property information and the sale price. If you’re getting a loan estimate before you’ve made an offer on a home, the property and sale price data may be general estimates.
In the top right corner, you’ll find details about your loan term (typically 15 or 30 years), the product type (fixed- or adjustable-rate), the loan type (conventional, FHA, VA or USDA) and whether your rate is locked. As you compare loan estimates, make sure you’re comparing similar products and terms for a true apples-to-apples comparison.
The rate-lock indicator is critical; if the box next to “Rate Lock” reads “NO,” your interest rate isn’t guaranteed and can change before closing. If it reads “YES,” you’ll see an expiration date and time. Miss that deadline to close on your loan, and you might incur fees to extend your rate lock or lose out on that rate for good.
Loan Terms
This section shows three key numbers:
- Loan amount: The total you’re borrowing from the lender.
- Interest rate: The fee you’ll pay to borrow money, expressed as a percentage.
- Monthly principal and interest: What you’ll pay toward the loan itself each month.
If applicable, this section will also spell out a prepayment penalty (for paying off your loan early) or, if your loan has a balloon payment: a large, lump-sum payment due at the end of your loan term (most mortgages don’t include this risky feature because if you can’t make the payment you could lose your home).
Projected Payments
In this portion of the first page, you’ll see how your loan will amortize over its lifetime, with calculations broken down by principal and interest through different years of your loan term, along with payments for mortgage insurance and estimated escrow. Escrow payments can increase if property taxes or insurance premiums rise.
Costs At Closing
Pay special attention to this section, which estimates how much cash you’ll need on hand to close your purchase. The first number is your estimated closing costs, which are typically 3% to 6% of the loan amount.
The estimated cash-to-close line includes closing costs, your down payment and any other agreed-upon payments (Page 2 provides detailed information on these fees). Save the loan estimate to compare it to the final closing disclosure you’ll receive at least 3 business days before closing on your home. If there’s a big jump in closing fees, your lender should explain why.
Page 2: Closing Cost Details
Here’s where lenders get into the finer points of your loan.
Loan Costs
- Origination Charges: In this section, you’ll see the fees your lender is charging to originate your loan. The origination fee is often around .5% to 1% of the loan amount. Within this category, costs are broken down by:
- Discount points – Each discount point equals 1% of the loan amount and is an optional charge to buy down your interest rate. As you compare loan estimates, check whether the lender includes discount points to secure the rate you’re being quoted; that can make a big difference in the quotes.
- Application fee – The charge to intake your application to ensure the lender is compensated for their time and work.
- Processing fee – A fee collected to handle the administrative costs of processing your loan, including verifying documents, conducting credit checks and other tasks.
- Services You Cannot Shop For: Under this section, you’ll see a list of third-party fees that are required to approve a mortgage, but you can’t shop around for them. These include:
- Appraisal fee – An independent appraiser typically charges a fee for a home appraisal to determine its current market value.
- Credit report fee – Credit bureaus typically charge this fee to produce your credit reports, which are used to qualify you for a mortgage and determine your mortgage rates.
- Flood determination fee – This fee is charged to determine whether the property is in a federally designated flood zone. Most loan programs require this documentation for final loan approval.
- Lender’s attorney fee – A charge your lender assesses to have a real estate attorney review your loan documents.
- Tax status research fee – To verify the property’s tax history and status with the local tax assessor’s office.
- Services You Can Shop For: This list of services is essential to your mortgage closing. Typically, lenders choose these companies, but you can technically shop around for them, including:
- Pest inspection fee – Required by some loan programs to ensure the property doesn’t have pests that would make the home unsafe or uninhabitable.
- Survey fee – A charge assessed to determine property lines and boundaries, if required by your loan program.
- Title – Courier fee – Assessed for document copies and mailings related to your title search and policy.
- Title – Lender’s title policy – Required insurance coverage that protects your lender against title problems like clerical errors, prior liens or competing ownership claims. Although you pay for it, the policy doesn’t protect you or your investment.
- Title – Settlement agent fee – This fee pays the agent who closes the mortgage at the end of the escrow process.
- Title – Title search– A charge for a title search on the property to ensure ownership can be transferred without liens or other encumbrances.
- Total Loan Costs: This line adds up all the costs in sections A, B and C to give you the full loan costs of your new mortgage.
Other Costs
These fees are factored into your closing costs but are separate from the lender’s charges. Here’s what they include.
- Taxes and Other Government Fees: A total of all local government fees for recording your mortgage into official records, including recording fees and transfer taxes.
- Prepaids: Your mortgage lender may require an escrow account to ensure your homeowners insurance premiums and property taxes are paid on time and in full every 12 months. This is the “Taxes and Insurance” portion of your mortgage payment. These line items include:
- Homeowners insurance premium – Mortgage lenders require you to carry homeowners insurance to protect the property against loss or damages when you finance your purchase. Insurers typically charge an annual premium that your lender pays from escrow, and they collect a portion from your monthly mortgage payment.
- Mortgage insurance premium – If you put down less than 20% on a conventional loan, you’ll pay private mortgage insurance premiums as part of your monthly mortgage payment. This fee is also required on all FHA loans (called MIP for short) and is paid both up front and annually.
- Prepaid interest – You’ll be required to pay a prorated interest amount based on when your purchase closes in the month.
- Property taxes – Your county or state charges annual property taxes to fund shared local public services, such as schools, fire and police departments, roads and libraries.
- Initial Escrow Payment At Closing: This is the amount due up front for the prepaid charges above, typically required for 2 – 6 months at closing.
- Other: This section will list any additional closing charges, such as the owner’s title policy, which is optional and protects you against external ownership claims or liens against the property’s title after you close.
- Total Other Costs: This is a tally of all fees listed in E, F, G and H.
- Total Closing Costs: This is the sum of sections D and I, plus any lender credits offered. Lender credits are rebates that your lender offers to offset your closing costs. You might pay a higher interest rate in exchange for the lender covering your closing costs up front. Make sure you ask your loan officer or broker which options are best and how they affect your total loan costs and mortgage rate.
Calculating Cash To Close
Pay close attention to this section because this is the amount you’ll need to bring to your loan closing to seal the deal. Also, make sure this total aligns with your expectations and, if not, ask your lender questions about any fees you don’t understand. This section includes:
- Total closing costs
- Closing costs financed
- Down payment/funds from borrower
- Deposit (your initial earnest money deposit you made with your offer)
- Funds for the borrower
- Seller credits
- Adjustments and other credits
Page 3: Additional Information About Your Loan
At the very top of the third and final page of your loan estimate, your lender’s information is detailed: the lender, the loan officer/broker name, mortgage licensing IDs for both the lender and loan officer or broker, their email addresses and phone numbers.
Comparisons
This section helps you accurately compare the loan estimate in front of you with others you receive from additional lenders. It explains what your loan payments will look like in five years, your interest rate and annual percentage rate (APR), and your total interest percentage (TIP), which is the total amount of interest in relation to your loan amount that you’ll pay during the loan term.
Other Considerations
This section explains different components of your mortgage and ongoing maintenance of your home loan, including:
- Appraisal: This explains how a lender uses an appraisal to assess your home’s market value. You’re entitled to a copy of the assessment, and you can pay for an additional appraisal if you disagree with the initial valuation.
- Assumption: If you sell the home or transfer ownership, your lender will explain whether it allows you to also transfer the mortgage terms, known as an assumable mortgage, to the new owner.
- Homeowners Insurance: Most mortgages require you to have homeowners insurance, which you’re responsible for shopping for and paying.
- Late Payment: This explains how your lender handles late mortgage payments. Many mortgages include a 15-day grace period on late payments before counting the payment late, then charge a late fee (typically a percentage of the monthly mortgage payment).
- Refinance: You can refinance your loan in the future if mortgage rates come down or your financial situation changes enough to provide you with better loan terms. You also don’t need to refinance with the same lender.
- Servicing: This indicates whether or not your lender intends to keep your loan on its books or resell it to another servicer. Many mortgage lenders resell your loan after closing, so you might make payments to a new loan servicer after a few months.
A note about homeowners insurance: It’s becoming increasingly expensive, adding to buyers’ affordability woes. According to the Insurance Journal, citing data from Insurify, U.S. home insurance premiums increased by 12% in 2025 and were predicted to rise another 4% for an average total of $3,057.
In an initial loan estimate, lenders might be underestimating insurance fees as a starting point, but the reality is the rates could be way higher once you shop for a specific property, especially in high climate-risk areas, Rueth notes. That’s why it’s more important than ever to shop for homeowners insurance as soon as you have an accepted purchase offer.
“People don’t realize that it falls squarely on the buyer’s shoulders to go and shop for the best insurance,” Rueth says. “That is going to grossly impact their cash to close and the way their loan estimate works and looks, because a full year of homeowners insurance is included.”
Confirm Receipt
Finally, this section is where you (and a co-borrower, if applicable) sign the loan estimate to confirm receipt. Signing the loan estimate does not legally bind you to accept the loan terms; you can continue to shop with other lenders.
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How To Compare Multiple Loan Estimates
Once you’ve collected loan estimates from at least three lenders, create a simple comparison chart focusing on these key costs:
- Total origination charges (Section A)
- Total closing costs (Section J)
- Interest rate
- APR
- Estimated monthly payment
- TIP
The lowest interest rate or lowest closing costs may not always be the best option. Look at the full picture; a loan with slightly higher closing costs but a lower interest rate might save you tens of thousands of dollars in interest over the life of the loan. But if you don’t have a ton of cash on hand, a slightly higher rate now to get into the home you want might be the right move because you can refinance if your financial situation improves down the line.
Timing Your Shopping Window
Credit scoring models typically treat multiple mortgage inquiries made within about 14 – 45 days as a single inquiry. This minimizes the impact on your credit report.
Plus, mortgage rates change daily, so you may want to further reduce your shopping window to ensure rates aren’t dramatically different.
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The Bottom Line: Review Loan Estimates Carefully And Shop Around
Don’t settle on the first loan estimate you receive. It’s wise to get at least three loan estimates from different lenders to see if you’re getting the best deal for your situation and goals.
Lenders should be willing and able to explain any fees you don’t understand, so ask a lot of questions. If you don’t get clear answers or they’re unresponsive, keep looking for a lender who will educate you about your new mortgage.
Ben Shapiro
Ben Shapiro is an award-winning financial analyst with nearly a decade of experience working in corporate finance in big banks, small-to-medium-size businesses, and mortgage finance. His expertise includes strategic application of macroeconomic analysis, financial data analysis, financial forecasting and strategic scenario planning. For the past four years, he has focused on the mortgage industry, applying economics to forecasting and strategic decision-making at Quicken Loans. Ben earned a bachelor’s degree in business with a minor in economics from California State University, Northridge, graduating cum laude and with honors. He also served as an officer in an allied military for five years, responsible for the welfare of 300 soldiers and eight direct reports before age 25.
