A loan estimate is a three-page form that presents home loan information in an easy-to-read format, complete with explanations. This standardization not only makes the information easy to digest; it also makes it easy to determine what the costs are. You’ll get a loan estimate within three business days of applying for a mortgage unless you don’t meet the lender’s basic qualifications and your application is rejected. The only fee you may have to pay to get a loan estimate is a credit report fee.
Page 1- Begins with Basic Information:
- Lender’s name and address
- Applicant’s name and address
- Property address and sale price
- Loan term, type, and purpose
- Loan ID number
- Loan estimate date
- Rate lock information
Page 2—Itemized Mortgage Costs
The loan estimate’s second page itemizes the loan’s closing costs and shows how much cash you’ll need to finalize the loan.
- Origination Charges
- Services You Cannot Shop For
- Services You Can Shop For
- Taxes and Other Government Fees
- Prepaids
- Initial Escrow Payment at Closing
- Other
Page 3—Comparisons and More Loan Characteristics
The top of Page 3 says who your loan officer is, what their license number is, and how to contact them (you might also be interested to know how loan officers are compensated).
Comparisons:
- Total principal, interest, mortgage insurance, and loan costs you will have paid after having the loan for five years (remember, loan costs are on Page 2)
- Total principal you will have paid off after five years, or how much equity you will have in your home, excluding any increase or decrease in its market value.
- Annual percentage rate, a figure that accounts for the loan’s interest rate and fees combined.
- Total interest percentage, a figure that shows how much interest you will pay over the entire loan term as a percentage of how much you’re borrowing.
Other considerations:
This section tells you six more things about the loan for which you’ve applied:
- Appraisal
- Assumption
- Homeowner’s Insurance
- Late Payment
- Refinance
- Servicing