How to compare mortgage offers with the Loan Estimate
When lenders must give you a Loan Estimate, what counts as an application, which fees can change, and how to compare offers line by line.
Mortgage prices differ from lender to lender, and the only reliable way to compare them is the federal Loan Estimate: a standard three-page form every lender must use for most mortgages. Because the form is the same everywhere, you can put offers side by side. This guide explains when you get one, what to look at, and the rules that protect you while you shop.
When a lender must give you a Loan Estimate
Under the TILA-RESPA Integrated Disclosure rule in Regulation Z, a lender must deliver or mail the Loan Estimate no later than the third business day after it receives your application (12 CFR 1026.19(e)). For this purpose, an application is just six pieces of information: your name, your income, your Social Security number (to pull credit), the property address, an estimate of the property's value, and the loan amount you want (12 CFR 1026.2(a)(3)). If you have not chosen a home yet, there is no property address, so a lender does not have to issue a Loan Estimate; many will still give you a written estimate for a sample property, which must carry the disclaimer described below.
What a lender can charge before you decide
Before you receive the Loan Estimate and tell the lender you intend to proceed, the lender may charge you only a bona fide and reasonable fee for your credit report (12 CFR 1026.19(e)(2)). No application fee, appraisal fee or lock fee can be collected until then. If a lender gives you its own worksheet or quote before the official form, the rules require it to say that your actual rate, payment and costs could be higher, and that you should get an official Loan Estimate before choosing a loan.
Shop on the same day
Rates change daily, sometimes several times a day. To compare fairly, ask each lender for a Loan Estimate on the same day, for the same loan amount, loan term and loan type, and with the same number of points. Multiple mortgage credit checks within a short shopping window are generally treated as a single inquiry by the major credit scoring models, so shopping several lenders should not hurt your score much more than shopping one.
Page 1: the loan and your payment
- Loan terms: the amount, interest rate and monthly principal and interest, and whether any of these can increase after closing. Check for a prepayment penalty or a balloon payment.
- Projected payments: principal and interest plus mortgage insurance and estimated escrow for taxes and homeowners insurance.
- Rate lock: whether the rate is locked and until when. An unlocked rate can change before closing.
Page 2: closing costs
Section A, Origination Charges, is the lender's own price: application, underwriting and origination fees, plus any points you pay to lower the rate. This is the section to compare most closely, together with the rate. Section B lists services the lender requires and chooses (such as the appraisal and credit report); Section C lists required services you can shop for yourself (such as title services). Sections E to H cover taxes, government fees, prepaid items, escrow and other costs that are largely the same whichever lender you use.
Page 3: comparisons
The Comparisons box shows what you will have paid in principal, interest, mortgage insurance and loan costs after five years, the Annual Percentage Rate (APR), and the Total Interest Percentage. APR folds most loan costs into a yearly rate, so it is useful for comparing offers with different combinations of rate and fees. It assumes you keep the loan for its full term, so if you expect to sell or refinance in a few years, look at the five-year figure and the upfront costs too.
Which costs can change
A Loan Estimate is binding within limits. Generally, the lender's own charges and fees for services where you were not allowed to shop cannot increase at closing; certain third-party fees can increase, but only up to a 10 percent cushion in total; and some items, such as prepaid interest and homeowners insurance, can change. A lender can issue a revised Loan Estimate only for specific reasons, such as a change you requested, information that turned out to be different (for example, an appraisal below the estimated value), or a rate you locked after receiving the first estimate. Ask why any revised estimate was issued.
The Closing Disclosure
You must receive the final Closing Disclosure at least three business days before closing (12 CFR 1026.19(f)). Compare it line by line with your last Loan Estimate. If something increased beyond the allowed limits, ask the lender to explain or correct it before you sign.
Points, credits and the break-even
Lenders usually offer a range of rate and cost combinations for the same loan. Paying discount points (each point is 1 percent of the loan amount) lowers the rate; accepting a higher rate can earn you a lender credit toward closing costs. To decide, divide the extra upfront cost by the monthly savings to see how many months it takes to break even, and compare that with how long you expect to keep the loan. Ask each lender for the same option, such as zero points, so the estimates are comparable.
A comparison checklist
- Same loan amount, term, type and lock period on every estimate.
- Interest rate and points (Section A) side by side.
- APR and the five-year total on page 3.
- Lock expiry date and the cost to extend it.
- Lender's name and NMLS ID on the form; check them on NMLS Consumer Access.
The CFPB's Loan Estimate explainer walks through a sample form line by line. If a lender will not give you a Loan Estimate after you have provided the six pieces of information, that is a reason to move on, and you can tell the CFPB through its complaint portal.
General information only, current as of the date above. The information on Mortgage Lender Data is not financial or legal advice and is not an offer of credit. We are not a lender, mortgage broker or loan originator; we take no applications, pass on no borrower information and recommend no lender. Lending figures come from each lender's HMDA filing for the year shown and describe past lending, not the rate, terms or decision you will get. Compare Loan Estimates from several lenders before you choose. Rules and programs change; check the official sources linked in this guide.