Loan Estimate
A Loan Estimate is the standardised three-page disclosure a lender must provide within three business days of receiving a mortgage application. Its format is fixed by regulation, which is the entire point — every lender's version has the same numbers in the same places.
What triggers it#
An application, defined as six pieces of information: name, income, Social Security number, property address, estimated property value, and loan amount.
Supply those six and the clock starts, whatever anyone called the conversation. Borrowers sometimes think they are still browsing when they have in fact applied.
What is on it#
Page one carries the loan terms, the projected payments including escrow, and the estimated closing costs and cash to close. This is the comparison page.
Page two itemises the costs — origination charges, services you cannot shop for, services you can, taxes, prepaids and escrow deposits.
Page three shows comparisons over five years, the APR, and the total interest percentage, along with whether the loan can be assumed and whether it carries a prepayment penalty or balloon.
Tolerances, which is where the real protection lives#
Not every number can change by closing, and the categories differ.
Zero tolerance. The lender's own charges, points, and fees for services the borrower cannot shop for generally cannot increase at all.
Ten percent cumulative. Certain third-party services from the lender's written provider list, plus recording fees, may rise but only by ten percent in aggregate.
No tolerance. Prepaid interest, property insurance premiums, escrow deposits, and services the borrower shopped for independently can move freely.
If a cost increases beyond its tolerance without a valid changed circumstance, the lender must cure the difference. That is a real remedy and it is why the document is worth keeping and comparing against the Closing Disclosure.
Comparing offers#
The standard format exists so that three Loan Estimates can be laid side by side and read across.
Compare the rate, the points, the lender charges, and the APR together rather than separately. A lower rate purchased with points and origination fees is not cheaper; it is prepaid. The five-year comparison on page three is the closest thing to a single honest number for a borrower who is not certain how long they will keep the loan.
Getting three of these is an afternoon's work and routinely saves thousands. Most borrowers get one.
Changed circumstances#
Tolerances are not absolute. A lender may reissue a Loan Estimate with higher costs where a valid changed circumstance occurs — and the definition is narrower than lenders sometimes imply.
Genuine examples: the appraisal comes in lower and the loan-to-value changes, the borrower's income turns out to differ from what was stated, the property proves to be in a flood zone, or the borrower requests a different loan product.
Not a changed circumstance: the lender realising it underquoted, or a cost the lender could have known about at application. If a revised estimate arrives, ask what specifically changed. The answer should be a fact about the loan, not about the lender's estimating.