How to read your Loan Estimate, page by page

The Loan Estimate is a standard form required by federal rules known as TRID (the TILA-RESPA Integrated Disclosure rule). You get one for most mortgages, including purchase loans and refinances. Home equity lines of credit and reverse mortgages use different disclosures.

The lender must deliver or mail your Loan Estimate within three business days after it receives your application. Under the rule, you've applied once you give the lender six pieces of information:

• your name
• your income
• your Social Security number, so the lender can check your credit
• the property address
• an estimate of the property's value
• the loan amount you want

Until you've received the Loan Estimate and told the lender you want to go ahead, the lender can't charge you fees, other than a reasonable fee for pulling your credit report. Signing the Loan Estimate only confirms you received it. It doesn't commit you to the loan.

The top of page 1 identifies the loan: the loan term (for example, 30 years), its purpose (purchase or refinance), the product (such as fixed rate or adjustable rate) and the loan type (conventional, FHA, VA or other). It also shows whether your interest rate is locked, and until when, and the date the other estimated closing costs expire.

Loan Terms

This table lists your loan amount, interest rate and monthly principal and interest. Next to each is the question "Can this amount increase after closing?" It also says whether the loan has a prepayment penalty or a balloon payment. Any "Yes" you didn't expect is worth asking about before you go further.

Projected Payments

Your estimated monthly payment, broken into principal and interest, mortgage insurance, and estimated escrow for property taxes and homeowner's insurance. If the payment changes over time, for example when mortgage insurance ends or an adjustable rate resets, you'll see separate columns. Below the table, the form shows your estimated taxes, insurance and assessments and whether they'll be paid through escrow.

Costs at Closing

Two headline numbers: estimated closing costs (the total from page 2, after any lender credits) and estimated cash to close, the amount you'd bring to closing.

Page 2 itemizes your closing costs. Loan Costs (Sections A to D) cover what it costs to make the loan. Other Costs (Sections E to I) cover taxes, prepaid items and escrow. Knowing which is which tells you where lenders actually compete.

Section D adds up A, B and C, and Section I adds up E through H. Section J, Total Closing Costs, is D plus I minus any lender credits. Lender credits are money the lender puts toward your closing costs, usually in exchange for a higher interest rate.

Below the sections, the Calculating Cash to Close table shows how your closing costs, down payment, deposit, seller credits and other adjustments add up to the cash you bring. If your loan has an adjustable rate or payment, extra tables show how and when it can change.

Page 3 lists the lender and loan officer with their NMLS license numbers, then three figures built for comparing offers:

• In 5 Years: the total you'll have paid in principal, interest, mortgage insurance and loan costs in the first five years, and how much principal you'll have paid off.
• Annual Percentage Rate (APR): your costs over the loan term expressed as a rate. It isn't your interest rate. APR is useful for comparing loans of the same type, but it assumes you keep the loan for its full term. If you expect to sell or refinance sooner, lean on the rate, the closing costs and the 5-year figure.
• Total Interest Percentage (TIP): the total interest you'd pay over the life of the loan, as a percentage of your loan amount.

The rest of page 3 covers other considerations: your right to a copy of the appraisal, whether a future buyer of your home could take over the loan, homeowner's insurance requirements, late payment fees, a reminder that refinancing later depends on things like your home's value, and whether the lender plans to service the loan itself or transfer it. The signature line only confirms you received the form.

• A "Yes" under "Can this amount increase after closing?" that you didn't expect, or a prepayment penalty or balloon payment.
• A rate that isn't locked when you thought it was, or a lock that expires before your expected closing date.
• Discount points in Section A you didn't ask for, or points that don't buy a lower rate than another lender offers without them.
• A stack of small lender fees in Section A (application, processing, underwriting, administration, document preparation) on top of an origination charge.
• A loan amount, loan type or term that doesn't match what you asked for.
• A Section F or G far lower than other lenders'. It won't change what you actually pay for insurance, taxes or interest, and it can make one offer look cheaper than it is.

None of these is automatically wrong, but each deserves a question to your loan officer, ideally in writing. Our guide to junk fees covers which Section A charges are worth pushing back on.

1. Ask on the same day. Rates change daily. Request estimates for the same loan amount, term and loan type, and the same lock period if you can.
2. Compare the rate and Section A together. A lower rate with points and a higher rate with lender credits can cost about the same. What matters is the total over the time you expect to keep the loan.
3. Compare Sections B and C. Service costs vary between lenders, and you may be able to shop Section C yourself.
4. Set Sections F and G aside. They mostly reflect timing, taxes and insurance, not lender pricing.
5. Check the "In 5 Years" figure if you expect to keep the loan about that long.
6. Ask for a match. If you prefer one lender but another is cheaper on specific lines, ask in writing whether they'll match it.

If you have two to four estimates, our Estimate Compare report lines them up for you and flags unusual fees. The free mortgage payment calculator is handy for checking the monthly figures.

Once you tell a lender you intend to proceed, it can start charging fees, such as for the appraisal. If you don't say you want to proceed within 10 business days after the lender gives you the Loan Estimate (or a longer period the lender allows), the lender can issue new estimates.

Keep your Loan Estimate. The charges on it are the baseline your final costs are measured against: some can't rise at all, some can rise a little as a group, and some can change freely. Our TRID tolerance guide explains the limits and the valid reasons a lender can revise them.

You'll get a Closing Disclosure at least three business days before closing. It uses the same sections, so you can check it line by line against this form. See Closing Disclosure explained for what to check.