How to Read Your Loan Estimate Like a Pro

What is a Loan Estimate?

The Loan Estimate (LE) is a 3-page government-mandated form that every lender must provide within 3 business days of your application. It was created by the CFPB so borrowers could compare offers side by side.

Page 1: the headline numbers

• Loan Terms: tells you the loan amount, rate, monthly payment, and whether the rate can change (ARM flag).
• Projected Payments: shows how your payment breaks down (principal, interest, PMI, escrow). Look for PMI — if it is listed, ask about lender-paid PMI.
• Costs at Closing: the total cash you need, including down payment and closing costs. Compare this across lenders — it varies wildly.

Page 2: the fees (where the hidden costs live)

• Section A – Origination Charges: points, processing fees, underwriting fees. A broker's fee lives here. If this section is over 2% of the loan, ask why.
• Section B – Services You Cannot Shop For: appraisal, credit report, flood cert. These should be similar across lenders.
• Section C – Services You Can Shop For: title insurance, settlement fees. These are NOT lender fees — you can negotiate these yourself.
• Section D – Total Loan Costs: A + B + C. This is your baseline.
• Section E – Taxes and Government Fees: recording fees, transfer taxes. Mostly fixed.
• Section F – Prepaids: prepaid interest, homeowner's insurance, property taxes.
• Section G – Escrow: initial escrow deposit. Some lenders require more than others.
• Section H – Other: owner's title insurance, survey. You can usually shop for these.
• Section I – Total Other Costs: E + F + G + H.
• Section J – Total Closing Costs: D + I.

Page 3: the fine print

• APR: as discussed, useful but imperfect.
• Total Interest Percentage (TIP): the total interest you will pay over the loan term as a percentage of the loan. Big number, but useful for comparing.
• Servicing: does the lender plan to service your loan or sell it?
• Escrow account: is the lender requiring an escrow account for taxes and insurance?

Red flags on the Loan Estimate

• Fees labeled "processing," "administration," "document prep" that are not listed in Section A — these get buried in other sections.
• A big jump between the initial LE and the final CD (Closing Disclosure). The law allows certain tolerances, but anything over 10% in Section A is a problem.
• Vague language like "up to" or "estimated" — the LE should have firm numbers, not ranges.