A Loan Estimate is made to be compared.

What the document does

A Loan Estimate is a standardized three-page form describing important features of a proposed mortgage. It includes estimated interest rate, monthly payment and total closing costs, as well as information that helps you compare loans.

For covered mortgages, a lender generally must provide it within three business days after receiving an application. Receiving a Loan Estimate does not mean the loan is approved.

Read beyond the rate

• Confirm the loan amount, purpose, product and term.
• Review principal and interest separately from estimated taxes, insurance and assessments.
• Check mortgage insurance and whether the payment can change.
• Compare closing costs, lender credits and estimated cash to close.
• Read the comparison measures and check for features such as a prepayment penalty or balloon payment.

Compare consistent scenarios

A lower rate can come with higher upfront costs. APR is a broader cost measure, but it does not replace reviewing cash to close and how long you expect to keep the mortgage. Ask whether the interest rate is locked and when the lock expires.

Bring your questions

If a line item is unclear, ask what it pays for, whether it can be shopped and whether it could change. A useful comparison should leave you understanding the tradeoffs.