What is a loan estimate and when do you get it?

0
  • A loan estimate sets out the terms of your mortgage and is useful for comparing offers from multiple lenders.
  • It explains how much you are borrowing, what closing costs you will need to pay, and what your monthly payments will be.
  • The lender you choose will send you a final closing statement, which you can compare to the loan estimate.
  • Learn more about Insider’s mortgage coverage here.

When you apply for a mortgage, the lender gives you a loan estimate. This document explains the terms of your mortgage and the amount you will pay.

You can apply for a mortgage with more than one lender and receive a loan estimate from each. This strategy allows you to compare the detailed offers of each lender and choose the one that works best for you.

What is a loan estimate?

A loan estimate is a three-page document that a lender gives you after you apply for a mortgage. Once the request is submitted, the company has three days to give you a quote. The government requires lenders to give this document to homebuyers, so the form is the same from lender to lender.

The estimate shows all the costs of buying a home, including closing costs and the interest rate.

You will receive a loan estimate when you buy or refinance a home. You will not get an estimate for certain types of home loans, such as reverse mortgages or HELOCs.

What set of items appear on a loan quote?

A loan estimate provides details about the amount you are borrowing, the interest rate, and closing costs. We have included a sample document from the Consumer Financial Protection Bureau website so you can see how the form works.

Page 1

The first page presents the basics of your mortgage. You will see the sale price, the mortgage amount, and the interest rate. You will also see what type of mortgage you get (for example, fixed rate vs variable rate and conventional vs FHA) and how long your rate is locked in.

Loan quote page 1

Page 1 of a loan estimate shows you the terms of your mortgage and the estimated monthly payments.


Consumer Financial Protection Bureau



The page also tells you how much you will pay each month and at closing.

Page 2

The second page explains how much you will pay in closing costs. Not all lenders charge the same fees – for example, some will not charge a set-up fee – so this itemized list of fees is useful for comparing offers from different lenders.

The lender lists the fees that are set in stone and those that you can research. You can choose to use the companies recommended by the lender for tasks such as pest inspections, or you can search for another company.

Loan quote page 2

Page 2 of a loan estimate details your closing costs.


Consumer Financial Protection Bureau



Once you own the home, you’ll likely be paying things like property taxes and home insurance every month. However, some lenders require that you pay a portion of these expenses at closing. Page 2 will tell you if this is the case.

You will see “estimated cash to close” at the bottom of the page. This includes both closing costs and the rest of the down payment you have left to pay, assuming you’ve already made a good faith deposit. A good faith deposit shows that you are serious about buying the house, and the seller is taking it off the market. Then you will submit the remainder of your down payment at closing.

Page 3

The last page gives you quick facts that you can compare with loan estimates from other lenders.

Loan estimate document page 3

Page 3 of a loan estimate tells you how much you are borrowing, the terms of your mortgage, and the estimated monthly payments.


Consumer Financial Protection Bureau



It also provides information such as the amount charged by the lender if your monthly payment is late.

Loan estimate vs. closing disclosure

Loan Estimate and Closing Disclosure are similar documents, but there are some important differences. The closing disclosure is essentially an updated and finalized version of the loan estimate.

You can apply for a mortgage loan from more than one lender and you will receive a loan estimate from each. Once you have chosen the lender you want to use, that company will send you a closing statement three days before the close. This second document provides the finalized closing costs and terms of your mortgage.

During this three-day period, you will go through the document and compare the numbers to what is in the loan estimate. At the top of page 3, the closing information explains if there are any changes from the loan estimate and, if so, what those changes are.


Source link

Leave A Reply

Your email address will not be published.