How to Compare Loans and Fees: The Importance of a Loan Estimate

When you’re reviewing mortgage options, it’s smart to look beyond the rate. A Loan Estimate disclosure puts key numbers including loan terms, projected payments and closing costs into a clear, standardized format you’ll receive within three business days of applying for a loan, so you can evaluate offers with real facts and figures.

From Good Faith Estimate to Loan Estimate: What Changed

Before 2015, lenders provided a Good Faith Estimate (GFE) to borrowers to detail closing costs. Then the Consumer Financial Protection Bureau® issued a new rule to combine the older Real Estate Settlement Procedures Act (RESPA) and Truth-in-Lending forms into the Loan Estimate and Closing Disclosure in an effort to make the information easier for borrowers to read, compare and act on.

Today, we use the Loan Estimate and Closing Disclosure in most instances with our mortgage products.

What You’ll See on a Loan Estimate: Page 1

1) Basic Information

First on your Loan Estimate you’ll find the loan term, purpose (whether the loan is for a purchase, refinance or construction), whether or not it’s fixed or an adjustable-rate mortgage (ARM), the loan type (Conventional, FHA or VA), your loan ID, and whether your rate is locked (and for how long). Confirm this information matches what you’ve discussed with your lender.

2) Loan Terms & Rate Structure

This table lays out your loan amount, interest rate, and monthly principal & interest, and notes if any of these can change after closing. It also discloses prepayment penalties or balloon payments, if applicable, so you know about any special features up front.

3) Projected Payments

Here you’ll see how your total monthly payment could evolve over time—including principal & interest, mortgage insurance (if any), and estimated escrow for taxes and homeowners insurance. If your rate can adjust, or if the loan has features that affect payment timing, this section maps those changes.

4) Costs at Closing

This gives you the figure for cash you’ll need at the closing table. It summarizes closing costs, prepaid items, and your cash to close after credits and deposits are factored in.

Page 2: The Detailed Cost Breakdown

5) Loan Costs

This section breaks down the fees tied directly to your loan. It includes origination charges, which are what the lender charges to process and underwrite your mortgage. It also lists services you cannot shop for, such as the appraisal or credit report fees from providers chosen by the lender, and services you can shop for, like title insurance or pest inspections—where comparing providers can save you money.

6) Other Costs

Here you’ll find expenses not charged by the lender but still due at closing. These include taxes and government fees for recording and transfer, prepaids like property taxes, homeowners insurance, and interest, plus your initial escrow payment to set up an account for future taxes and insurance. Finally, it covers other costs, such as HOA dues or optional home warranties.

7) Calculating Cash to Close

This section shows how the Loan Estimate summed up your numbers: total closing costs, any costs financed, down payment/funds from you, deposit (earnest money), seller credits, funds to borrower (for some refinances), and other adjustments. It’s the breakdown of the “cash to close” figure.

Page 3: Comparing Offers & Important Fine Print

8) Comparisons

To make side‑by‑side shopping easier, the LE includes “In 5 Years” (total paid and principal reduction), APR (the annual percentage rate which includes annual costs and certain fees), and TIP (Total Interest Percentage over the life of the loan). Use these to evaluate long‑term cost, rather than just the monthly payment.

9) Other Considerations

This section covers borrower rights and responsibilities. It includes details about the appraisal, assumption (can someone eventually take over the loan), homeowners insurance, late payment policy, refinancing, and servicing (whether your lender will service or transfer the loan).

Take Advantage of your Loan Estimate

The Loan Estimate delivers clear information to borrowers—while adding fee‑tolerance safeguards and a standardized design that make it easier to understand. Use the Loan Estimate to choose a loan that truly fits your budget and goals.

Have questions or looking to reach your next major homeownership milestone? Reach out to one of our loan experts and they’ll be glad to walk you through your options.

Consumer Financial Protection Bureau® is a registered trademark of the Consumer Financial Protection Bureau.