Before deciding on a lender, it is important to research your options and find the loan that best fits your financial needs. When you start your research, you can request a Loan Estimate from as many lenders as you wish. Each lender will supply you with a Loan Estimate in the same, straightforward format, making it easy to compare your loan offers. To make your research as smooth as possible, below is an explanation of each section of a Loan Estimate:
Loan Estimate Summary
The first page of a Loan Estimate is a summary of the loan broken down into the following four parts:
Included here are the date issued, applicants, property address and the sale price. It will also state the proposed loan term, whether the loan was for a purchase or refinance, if a certain loan product was used, the loan type, loan ID number and the rate lock. It is important that all this information accurately reflects the information you and your loan advisor discussed. If anything looks different than what you expected, ask the loan advisor for clarification.
This section identifies the loan amount, interest rate, monthly principal and interest. Remember if the estimate is for an adjustable rate mortgage, these amounts can increase after closing. This section will also indicate whether or not your loan has a prepayment penalty or balloon payment.
Here, you will see the payment calculation for your estimated total monthly payment. This calculation includes your monthly principal and interest, mortgage insurance and your estimated escrow. Your estimated escrow will include any charges related to homeownership, including any property taxes or homeowner’s insurance.
Costs at Closing
This shows a summary of the estimated closing costs and the estimated cash to close. The estimated cash to close includes your down payment and other costs or fees to be paid at closing.
Closing Cost Details
On the second page of the Loan Estimate you will find a breakdown of the closing costs associated with your loan. The Closing Cost Details are broken down into your ‘Loan Costs’ and ‘Other Costs.’
- ‘Loan Costs’ is comprised of one-time costs broken into three sections: Section A (Origination Charges), Section B (Services You Cannot Shop For) and Section C (Services You Can Shop For).
- ‘Other Costs’ is comprised of a combination of prepaid and one-time costs, including taxes and other government fees, prepaids, initial escrow payment at closing, and any other costs.
For a more detailed breakdown of Closing Costs, please click here.
Additional Information about Your Loan
At the top of page 3, you will find the lender or mortgage broker’s information. This will include their NMLS # and license ID, their name, email address and phone number. Make sure the information that is listed for your loan advisor is correct.
For more information about finding the right mortgage professional for you, click here.
This section offers several calculations to help you compare the cost of this loan with other offers from different lenders. Loan costs can vary across lenders and different types of loans. To ensure that you are getting the loan that fits your financial needs, request Loan Estimates for the same type of loan from different lenders.
‘Other Considerations’ will share other important information regarding your loan. This section will say whether your loan requires an appraisal of the property and who is responsible for paying that fee. It will state whether or not your loan can be assumed by another person, if you were to sell or transfer the property to someone else. It will also define the requirements for homeowner’s insurance, late payment fees and potential for a future refinance. This section will also state your lenders intention to service your loan or transfer the servicing to another lender.
By signing the receipt, you are acknowledging that you have received this Loan Estimate. It does not mean that you are required to accept this loan.
To look at a sample Loan Estimate, click here.
Contact an RPM loan advisor if you would like assistance understanding your Loan Estimate and financing options.
By Kendall Taylor