A mortgage Loan Estimate organizes expected loan terms and costs into a standard three-page form. It is most useful when you compare equivalent requests and investigate differences instead of choosing the lowest payment or cash-to-close figure. Receiving the form is not final loan approval, as the CFPB’s review guidance explains.
Keep every version with its issue date. If a lender updates an estimate, compare the replacement with the previous version and identify what changed.
Start with the same borrowing scenario
Ask lenders to evaluate the same purchase price, down payment, loan amount, term, loan type, and fixed or adjustable structure. Use a similar expected closing date. The CFPB recommends selecting the loan type before requesting comparisons.
If one lender quotes a shorter term or adds costs to the principal, the payment difference answers a different question. Record those differences before ranking offers. Also check whether each estimate includes the same mortgage-insurance assumptions.
Page 1: confirm the loan and the monthly obligation
Check the Loan Terms section for the amount, interest rate, principal-and-interest payment, and any indication that a figure can increase. Look for a balloon payment or prepayment penalty and ask for an explanation if either appears.
Next, read Projected Payments. Principal and interest alone may not be the complete monthly obligation. Mortgage insurance and estimated escrow can add to it, while some taxes, insurance, or assessments may require separate payment.
The CFPB’s Loan Estimate explainer walks through these fields. Put the complete expected housing payment into your household budget, then allow separately for maintenance, utilities, and other ownership expenses.
Check the rate lock before comparing prices
At the top of page 1, check whether the interest rate is locked and when that lock expires. An unlocked rate can change. Even a lock depends on its conditions, including the application information and closing timeline.
Ask whether an extension is possible, what it could cost, and what happens if closing is delayed. The CFPB’s rate-lock guide explains why the form alone does not answer every lock-policy question. Comparing a locked offer with a floating quote without noting the difference can be misleading.
Page 2: separate charges from estimated deposits
Look at origination charges, required services you cannot shop for, services you can shop for, and lender credits. Then distinguish these from government charges, prepaid items, and the initial escrow deposit. The CFPB’s comparison guide cautions that lower tax or insurance estimates do not necessarily indicate a better loan.
Here is a hypothetical purchase of a $300,000 home with a $50,000 down payment and a $250,000 loan. Assume both offers have the same loan type, term, interest rate, and rate-lock period. No closing costs are financed, and there is no earnest-money deposit already paid, seller credit, or other adjustment. These are illustrative amounts, not market quotes.
| Estimated item | Offer A | Offer B |
|---|---|---|
| Origination charges | $1,500 | $1,200 |
| Other loan services | $2,400 | $2,400 |
| Government charges | $1,200 | $1,200 |
| Prepaids and initial escrow | $2,800 | $3,600 |
| Lender credit | −$200 | $0 |
| Total estimated closing costs | $7,700 | $8,400 |
| Down payment | $50,000 | $50,000 |
| Estimated cash to close | $57,700 | $58,400 |
Offer A’s closing costs equal $1,500 + $2,400 + $1,200 + $2,800 − $200 = $7,700. Adding the down payment produces $57,700.
Offer B requires $700 more estimated cash, yet its origination charges after the listed lender credit are $100 lower: $1,200 versus $1,300. The $800 difference in prepaids and escrow reverses the apparent result. Ask both lenders to reconcile their assumptions before interpreting that difference as a real saving.
In an actual transaction, already-paid deposits, seller credits, financed costs, and other adjustments can change cash to close. Follow the form’s calculation rather than adding the down payment to an isolated fee subtotal.
Page 3: use APR and the comparison figures
The interest rate and APR serve different purposes. APR includes the interest rate and certain other borrowing charges, making it broader than the rate alone. It is still not a substitute for reviewing the cash requirement and loan structure. The CFPB’s mortgage APR explanation also warns that an adjustable-rate APR does not show the maximum possible rate.
For the “In 5 years” comparison, subtract the principal paid from the total paid to estimate borrowing costs over that period, following the CFPB’s comparison guide. If you expect to keep the loan for a different period, ask for that scenario instead of treating five years as your personal plan.
Resolve differences before choosing
Write down the remaining questions: inconsistent tax estimates, unexplained fees, missing insurance, a lock that expires too soon, or a payment your budget cannot support. Ask for written clarification or a corrected estimate. Keep the selected estimate for comparison with the later Closing Disclosure, including any explanations for changed figures.