Reading a Loan Estimate Without Getting Lost

The top of Page 1 identifies the lender, the property address, the loan purpose, and the date the estimate was issued. Beneath that, the Loan Terms table shows:

• Loan Amount: The principal you are borrowing — not the purchase price.
• Interest Rate: The rate used to calculate your monthly interest charge.
• Monthly Principal & Interest: Your base payment, excluding taxes and insurance.
• Prepayment Penalty / Balloon Payment: Two boxes that should read "NO" for most conventional loans. If either reads "YES," ask for a full written explanation before continuing.

Below Loan Terms, Projected Payments breaks your total monthly payment into principal and interest, mortgage insurance (if applicable), and estimated escrow (taxes and homeowners insurance). This is the number closest to what you will actually write a check for each month.

Still on Page 1, the Costs at Closing summary gives you two headline figures:

• Closing Costs: The total of all fees you will pay to complete the transaction.
• Cash to Close: The full amount you need to bring to the closing table — closing costs plus your down payment, minus any credits or deposits already paid.

These numbers are estimates at this stage. The detailed breakdown appears on Page 2, where you can evaluate each fee individually.

Page 2 is the most detailed section. It separates costs into two main columns:

Loan Costs (Section A, B, C)

Section A lists origination charges — points, origination fees, and underwriting fees paid directly to the lender. These are generally not shoppable. Section B covers services you cannot shop for (appraisal, credit report). Section C lists services you can shop for, such as title insurance and settlement agents.

Other Costs (Sections E, F, G, H)

Taxes and government fees (recording fees, transfer taxes), prepaids (prepaid interest, homeowners insurance premium), and the initial escrow payment at closing. These are largely set by local government or loan structure and are less negotiable.

On the right side of Page 2, look for the APR (Annual Percentage Rate) and the Total Interest Percentage (TIP). The APR folds most lender fees into the interest rate to give a fuller cost picture. The TIP shows the total interest you will pay over the full loan term as a percentage of the loan amount — a useful reality check on long-term cost.

Page 3 contains several important elements often overlooked:

• Comparisons table: Shows the APR, TIP, and total payments in 5 years — handy for side-by-side lender evaluation.
• Other Considerations: Discloses whether the lender intends to service the loan or sell it, and notes appraisal and homeowners insurance requirements.
• Confirm Receipt: Your signature here acknowledges you received the estimate — it does not commit you to the loan.

Three business days before closing, you will receive a Closing Disclosure — the final version of the same information. Compare it directly against your Loan Estimate. Under TRID rules, certain fees cannot increase at all (Section A lender fees), others can increase by no more than 10% (most Section B and C fees), and some can change without limit (prepaid items, escrow). Any unexpected increases in the fixed or capped categories should be raised with your lender immediately and in writing.