What Is Loan Estimate?
The Loan Estimate is a standardized form a lender must give you within three business days of a mortgage application. It shows the estimated interest rate, monthly payment, closing costs and cash to close in the same format at every lender, which makes competing offers easy to compare.
Loan Estimate in plain English
The Loan Estimate is the standard form every lender gives you after you apply. Because every lender uses the same layout, you can line up offers side by side.
Page 1 shows the loan terms, projected payments and estimated cash to close; page 2 lists closing costs; page 3 has comparison figures including the APR.
Example
On the CFPB's sample Loan Estimate, a $162,000, 30-year loan at 3.875% shows a $761.78 monthly principal and interest payment and $16,054 of estimated cash to close.
Try it: Loan Estimate with your own numbers
Interactive and illustrative: change any value and the results update instantly in your browser. The figures come from the same engines as REAIXO's full calculators.
APR vs interest rate
The interest rate sets the payment. The APR spreads lender charges over the loan, so it is the better number for comparing offers.
- Interest rate
- 6.500%
- Payment $1,896 a month
- APR
- 6.662%
- 0.162 points above the rate
- Finance charges in the APR
- $5,000
- $2,750 of third-party fees excluded
Formula
APR = the rate at which the payments’ present value equals the amount financedAmount financed = Loan − Points − Lender feesAssumptions
- Regulation Z actuarial method, fixed-rate loan held to term.
- Appraisal and title fees are third-party charges not counted as finance charges here.
- If you sell or refinance early, the real cost of upfront fees is higher than the APR suggests.
Closing costs: what you pay for at the closing table
Closing costs are a mix of lender charges, title and settlement services, government fees and prepaid bills for your own taxes and insurance.
- Estimated closing costs
- $16,037
- 4.0% of the price
- Typical range
- $13,792 – $18,282
- Cash needed with down payment
- $56,037
- Loan $360,000
- Lender charges$2,475
- Title and settlement$3,750
- Government charges$4,250
- Prepaids and escrow (your own future bills)$5,562
Show the numbers as a table
| Item | Group | Amount |
|---|---|---|
| Origination | Lender charges | $1,800 |
| Appraisal | Lender charges | $600 |
| Credit report | Lender charges | $75 |
| Title insurance | Title and settlement | $2,000 |
| Settlement fee | Title and settlement | $650 |
| Attorney fees | Title and settlement | $750 |
| Other fees | Title and settlement | $350 |
| Recording fees | Government charges | $250 |
| Transfer tax (buyer share) | Government charges | $4,000 |
| Prepaid property tax | Prepaids and escrow (your own future bills) | $1,600 |
| First-year homeowners insurance | Prepaids and escrow (your own future bills) | $1,200 |
| Escrow deposit | Prepaids and escrow (your own future bills) | $1,800 |
| Prepaid interest | Prepaids and escrow (your own future bills) | $962 |
Formula
Closing costs = Lender charges + Title and settlement + Government charges + Prepaids and escrowAssumptions
- National-average fee schedule from the Closing Cost Calculator; transfer taxes and title rates vary widely by state and county.
- Your Loan Estimate lists the real figures; compare it line by line.
Why it matters
Comparing Loan Estimates issued on the same day for the same loan type is the most reliable way to see which lender is cheaper. Some figures can change before closing, within limits set by federal rules.
What it means for you
What buyers should know
Request Loan Estimates from at least two or three lenders before choosing.
Common mistakes
- Comparing Loan Estimates issued on different days, when rates differ.
- Looking only at page 1.
- Not checking whether the rate is locked.
Compare and common questions
Loan Estimate: frequently asked questions
When do I get a Loan Estimate?
Within three business days after a lender receives your application.
Is the Loan Estimate an approval?
No. It is a disclosure of estimated terms and costs, not a commitment to lend.
How do I compare two Loan Estimates?
Use the same loan type and amount on the same day, then compare the rate, the lender charges in section A, the cash to close and the APR on page 3.
Go deeper
Recommended calculators
Run Loan Estimate with your own numbers:
Related Terms
Where it fits
- Buying a home, Preapproval: before this, Pre-Approval; next, Conventional Loan.
More Financing Terms
Recommended next step
A line-by-line guide to choosing between offers.
Compare loan estimates →Sources and review
- Loan Estimate explainer, Consumer Financial Protection Bureau. Supports: What the Loan Estimate contains and when it is provided.
Where this applies: United States. Federal disclosure and servicing rules (TILA/Regulation Z, RESPA/Regulation X) apply nationwide; loan-program rules come from Fannie Mae, Freddie Mac, FHA, VA, USDA or the lender.
Last reviewed: · Updated:
Examples use illustrative figures; rules of thumb are labelled as such. Rates, limits and program rules change - confirm current figures with your lender or a qualified professional.
This definition is provided for general educational purposes and is not financial, legal, tax, or real estate advice. Verify important decisions with appropriately qualified professionals.
Understand a property's costs and risks before you make an offer
Use the free calculator for your own numbers, or analyze a specific home before you commit.
Or analyze a specific property: Essential Property Analysis, $19 · Property Decision Analysis, $49 · Professional Property Analysis, $99. You choose the depth before you pay.