What Is a Loan Estimate?
A Loan Estimate is a standardized three-page form that provides detailed information about your mortgage loan. Federal law requires lenders to provide this document within three business days after you submit a loan application.
This document helps you understand the loan you're applying for and makes it easier to compare offers from different lenders. It replaces the old Good Faith Estimate (GFE) and initial Truth-in-Lending disclosure.
📋 Important Timeline
You'll receive your Loan Estimate within 3 business days of application and must receive it at least 7 business days before closing.
Page 1: Loan Terms and Projected Payments
Loan Terms
This section shows the basic terms of your loan:
- Loan Amount: The amount you're borrowing
- Interest Rate: Your rate and whether it can change
- Monthly Principal & Interest: Your base payment amount
- Prepayment Penalty: Whether you'll be charged for paying off early
- Balloon Payment: Whether you'll owe a large payment at the end
Projected Payments
Shows how your payment may change over time:
- Principal & Interest: Your base loan payment
- Mortgage Insurance: If required (FHA/conventional with <20% down)
- Estimated Escrow: Property taxes and homeowners insurance
- Estimated Total Monthly Payment: Your complete payment including all items
Costs at Closing
Page 1 also provides a summary of closing costs:
Estimated Closing Costs
Total fees to close your loan
Estimated Cash to Close
Total amount needed at closing
Cash from/to Borrower
Your final amount due
💡 Pro Tip
Look carefully at whether your interest rate or payment can increase. This is crucial for long-term planning and budgeting.
Page 2: Closing Cost Details
Page 2 breaks down all closing costs into detailed categories. Understanding these sections helps you know exactly what you're paying for.
Section A: Origination Charges
Fees charged by your lender:
- • Origination fee or points
- • Application fee
- • Underwriting fee
- • Processing fee
Note: These fees go directly to your lender and may be negotiable.
Section B: Services You Cannot Shop For
Required services chosen by lender:
- • Appraisal fee
- • Credit report fee
- • Flood certification
- • Tax service fee
Note: Lender is responsible if these exceed estimate by more than 10%.
Section C: Services You Can Shop For
Services where you choose the provider:
- • Survey fee
- • Title search and insurance
- • Home inspection
- • Pest inspection
Opportunity: You can save money by shopping around for these services.
Sections E, F, G, H
Other important costs:
- E: Taxes and government fees
- F: Prepaids (insurance, property taxes, interest)
- G: Initial escrow payment
- H: Other costs (HOA, home warranty)
⚠️ Important to Know
Some costs cannot increase at all (Section B - Cannot Shop For), while others can increase up to 10% (Section C - Can Shop For). Know which category each fee falls under.
Page 3: Additional Information & Comparisons
Calculations
This section shows important metrics:
- Total of Payments: Amount you'll pay over the life of the loan
- Finance Charge: Total cost of credit over loan term
- Amount Financed: Loan amount minus prepaid finance charges
- APR: Annual Percentage Rate including all costs
Other Considerations
Important details about your loan:
- • Appraisal information
- • Assumption policy
- • Homeowner's insurance requirements
- • Late payment policy
- • Refinance options
- • Servicing information
Comparisons Section
Page 3 includes helpful comparison tables to evaluate different loan offers:
$X,XXX
In 5 Years
Total you will have paid in principal, interest, mortgage insurance, and loan costs
$XX,XXX
Principal Paid Off
How much of your principal you'll pay down in 5 years
X.XX%
Annual Percentage Rate (APR)
Your costs over the loan term expressed as a rate
How to Compare Loan Estimates
When you receive multiple Loan Estimates, use these strategies to compare them effectively:
1. Compare Loan Terms First
- ✓ Make sure loan amounts are the same
- ✓ Compare interest rates
- ✓ Check if rates can change
- ✓ Look for prepayment penalties
- ✓ Verify loan terms (15 vs 30 years)
2. Analyze Total Costs
- ✓ Compare estimated closing costs
- ✓ Look at cash to close amounts
- ✓ Check Section A (origination charges)
- ✓ Review total interest paid over loan life
- ✓ Consider APR differences
3. Review Monthly Payments
- ✓ Compare principal & interest amounts
- ✓ Check mortgage insurance costs
- ✓ Review estimated escrow amounts
- ✓ Look at total monthly payment
- ✓ See if payments can increase
4. Look Beyond Numbers
- ✓ Consider lender reputation
- ✓ Evaluate customer service
- ✓ Review closing timeline
- ✓ Check for servicing transfer
- ✓ Assess overall responsiveness
💡 Comparison Tool
Create a simple spreadsheet to compare Loan Estimates side-by-side. Focus on: interest rate, APR, monthly payment, closing costs, and cash to close.
Common Questions About Loan Estimates
Can the numbers on my Loan Estimate change?
Yes, some can. Fees in Section B (Services You Cannot Shop For) cannot increase by more than 10%. Section C (Services You Can Shop For) can change if you use providers outside the lender's list. Your final costs will be shown on the Closing Disclosure.
What's the difference between APR and interest rate?
The interest rate is what you pay on the loan principal. The APR (Annual Percentage Rate) includes the interest rate plus other costs like points, fees, and mortgage insurance, expressed as an annual rate. APR gives you a fuller picture of the loan's total cost.
How long is the Loan Estimate valid?
Generally, the Loan Estimate is valid for 10 business days. If you don't move forward within this timeframe, the lender may need to provide an updated estimate, especially if interest rates have changed.
What if I find a better offer after receiving a Loan Estimate?
You're not obligated to proceed with a lender just because you received a Loan Estimate. You can shop around and compare multiple offers. However, be mindful of rate locks and timing if you're under contract to purchase a home.
Do I need to pay anything to receive a Loan Estimate?
By law, lenders can only charge you for a credit report before providing a Loan Estimate. You should not be charged application fees or other costs until you decide to move forward with the loan.
How is the Loan Estimate different from the Closing Disclosure?
The Loan Estimate is provided early in the process (within 3 business days of application) and shows estimated costs. The Closing Disclosure shows the final, actual costs and must be provided at least 3 business days before closing.
Arizona-Specific Considerations
Arizona Transfer Taxes
Arizona doesn't have state-level transfer taxes, but some counties and municipalities may charge recording fees or doc stamps. These will appear in Section E of your Loan Estimate.
Property Taxes
Arizona property taxes are typically paid twice yearly. Your Loan Estimate will include estimated monthly escrow amounts. Rates vary significantly by county and school district.
Homeowners Insurance
Arizona's climate requires specific insurance considerations. Your estimate should reflect adequate coverage for monsoon season, extreme heat, and potential flood zones in some areas.
HOA Considerations
Many Arizona communities have HOAs. While HOA fees aren't included in your loan payment, they may appear in Section H as information about additional costs you'll need to budget for.
Next Steps After Receiving Your Loan Estimate
1. Review Carefully
Take time to read every section. Make notes of anything you don't understand or want to discuss with your lender.
2. Ask Questions
Contact your loan officer to clarify any confusing terms, fees, or requirements. No question is too small.
3. Compare Offers
If shopping around, compare multiple Loan Estimates carefully. Look beyond just the interest rate.
4. Budget Accordingly
Use the Cash to Close amount to prepare your finances and ensure funds are available when needed.
5. Consider Rate Lock
Discuss rate lock options with your lender to protect against rate increases during processing.
6. Move Forward
Once satisfied with the terms, indicate your intent to proceed and provide any requested documentation.
Related Mortgage Resources
Ready to Get Your Loan Estimate?
Work with Arizona's trusted mortgage experts. We'll guide you through every step of the process and help you understand your loan options.
📞 Call us: 480-330-1724
✉️ Email: [email protected]