How do I read a Loan Estimate?
A Loan Estimate is a standardised three-page form every lender must give you within three business days of your application. Because the layout is identical across lenders, you can compare offers line by line — the numbers that matter most are the interest rate and Section A origination charges on page two, and the five-year cost comparison on page three.
The Loan Estimate replaced the old Good Faith Estimate in October 2015 under the Know Before You Owe rules. Its single most useful property is that lenders cannot redesign it. Every Loan Estimate has the same sections in the same order, so two offers can be laid side by side and read directly against each other.
Page one
Loan amount, interest rate, monthly principal and interest, and whether any of them can increase after closing. Check the three “can this amount increase” answers before anything else — they tell you whether you are looking at a fixed loan or an adjustable one.
Page two — where the real comparison happens
- Section A, Origination Charges. What the lender is charging you. This is the number to compare hardest, because it is the part the lender fully controls.
- Section B, Services You Cannot Shop For. Appraisal, credit report, flood determination. Broadly similar between lenders.
- Section C, Services You Can Shop For. Title services, settlement fees. You are allowed to use your own provider, and the savings can be real.
- Sections E, F and G. Taxes, prepaid interest and escrow. These are not lender charges — they are your money going to third parties, and they should be roughly the same wherever you borrow.
Page three
The comparison box is the most underused part of the form. “In 5 Years” tells you total dollars paid and principal repaid over five years. For most borrowers that is a far better guide than the APR, because it reflects a realistic holding period rather than a full 30-year term.
Comparing two estimates
Hold the loan amount, product and lock period constant, then compare the interest rate, Section A, and the five-year figure. If one lender wins on all three, the decision is straightforward. If they split, the break-even arithmetic decides it.
Related questions
Is a Loan Estimate binding?
Partly. Lender charges in Section A cannot increase at all without a valid changed circumstance, and Section C charges have a 10% tolerance as a group. Sections E through G can move freely, because they are third-party costs the lender does not control.
Does asking for a Loan Estimate hurt my credit?
A single hard inquiry has a small effect. Credit scoring models treat multiple mortgage inquiries inside a short shopping window as one event, so shopping several lenders in a couple of weeks costs you very little.
What if a lender will not give me one?
They must, within three business days of a complete application. A lender who offers only an informal worksheet instead is giving you something you cannot reliably compare — and that is usually the point.