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Interactive · Loan Estimate

Loan Estimate decoder: check yours line by line

Grab your Loan Estimate and walk through it with me, section by section. What to look for, and the red flags I catch most often.

By , Loan Officer, NMLS #2470539
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Page 1 · Step 1 of 12

Page 1: header and rate lock

The top of page 1 shows the date issued, loan term, purpose, product, loan type, and whether your rate is locked.

What to look for

✓ Loan type matches what you discussed (Conventional, FHA, VA).
✓ Rate Lock says YES with an expiration date, or you know why it says NO.
✓ Closing cost estimates expiration date: generally good for at least 10 business days.

Red flags

⚑ Rate Lock: NO when you thought you were locked.
⚑ Loan type or product you didn't ask for.

Page 1 · Step 2 of 12

Page 1: Loan Terms

Loan amount, interest rate, and monthly principal and interest, each with “Can this amount increase after closing?”

What to look for

✓ Loan amount matches price minus down payment (plus any financed fees like FHA upfront MIP or VA funding fee).
✓ Prepayment Penalty and Balloon Payment: most everyday home loans say NO.

Red flags

⚑ Prepayment Penalty: YES on a home you live in. Ask why.
⚑ Balloon Payment: YES.

Page 1 · Step 3 of 12

Page 1: Projected Payments

Breaks your payment into principal and interest, mortgage insurance, and estimated escrow (taxes and insurance).

What to look for

✓ Mortgage insurance shows on FHA loans and on most conventional loans with a smaller down payment.
✓ Escrow estimate is based on the actual property's taxes, not a placeholder.
✓ HOA dues appear in Estimated Taxes, Insurance & Assessments if there's an HOA.

Red flags

⚑ Escrow that looks too light for the property's real taxes.
⚑ FHA loan with no mortgage insurance shown.

Page 1 · Step 4 of 12

Page 1: Costs at Closing

Estimated Closing Costs and Estimated Cash to Close, the number you bring to the table.

What to look for

✓ Don't compare lenders on cash to close alone. Credits and financed costs move it.

Red flags

⚑ Cash to close much lower than another lender's with similar fees. Look for missing prepaids or escrow.

Page 2 · Step 5 of 12

Section A: Origination Charges

The lender's own fees, plus any discount points you're paying to buy down the rate. The cleanest place to compare lenders.

What to look for

✓ Every fee has a clear name. Ask what each is for.
✓ If there are points, ask what the rate would be with zero points.

Red flags

⚑ Stacked fees with vague names (application, processing, underwriting, admin, document prep…).
⚑ Points you didn't ask for.

Page 2 · Step 6 of 12

Section B: Services You Cannot Shop For

Third-party services the lender picks: appraisal, credit report, flood certification, and on government loans, FHA upfront MIP or the VA funding fee.

What to look for

✓ Appraisal fee looks normal for the area.
✓ VA funding fee: if you receive VA disability compensation, you're generally exempt. Check your COE.

Red flags

⚑ VA funding fee charged to an exempt veteran.
⚑ Unexplained “service” fees.

Page 2 · Step 7 of 12

Section C: Services You Can Shop For

Services you can pick yourself, mostly title and survey in Texas.

What to look for

✓ Texas title premiums are set by the state, so the lender's title policy premium shouldn't vary much. Other title fees can.
✓ Ask whether the seller's existing survey can be used.

Red flags

⚑ Title fees far above other quotes for the same property.

Page 2 · Step 8 of 12

Section E: Taxes and Other Government Fees

Recording fees and any transfer or mortgage taxes.

What to look for

✓ Texas: no transfer tax, so it's usually just recording fees.
✓ Tennessee: expect a transfer tax and a mortgage tax.

Red flags

⚑ “Transfer tax” on a Texas Loan Estimate. Ask what it is.
⚑ Tennessee Loan Estimate with only recording fees.

Page 2 · Step 9 of 12

Section F: Prepaids

Your first year of homeowner's insurance, prepaid interest from closing to month-end, and sometimes property taxes.

What to look for

✓ Homeowner's insurance shows a full 12 months.
✓ Prepaid interest days make sense for your closing date.

Red flags

⚑ Insurance missing or only a few months.
⚑ A huge number of prepaid interest days.

Page 2 · Step 10 of 12

Section G: Initial Escrow Payment at Closing

The cushion that starts your escrow account for taxes and insurance.

What to look for

✓ Months listed for taxes and insurance look reasonable for when taxes are due.

Red flags

⚑ Escrow cushion that's very small or zero when taxes are escrowed.

Page 2 · Step 11 of 12

Section J and Calculating Cash to Close

J is total loan costs plus other costs, minus lender credits. Then the cash-to-close table adds your down payment and subtracts deposits and seller credits.

What to look for

✓ A lender credit usually comes from taking a higher rate. Know the trade.
✓ Seller Credits match what your contract says.

Red flags

⚑ Seller credit you negotiated shows $0.
⚑ Big lender credit with a rate higher than other quotes.

Page 3 · Step 12 of 12

Page 3: In 5 Years, APR, TIP

The comparison page: total paid in 5 years, principal paid down in 5 years, APR, and Total Interest Percentage.

What to look for

✓ In 5 Years is one of the best apples-to-apples lines between two offers.
✓ APR folds in costs; compare APRs for the same loan type and term.

Red flags

⚑ Lower rate but higher In 5 Years total: the fees may be eating the savings.
Send me yours →

What is a Loan Estimate?

A Loan Estimate is the standard three-page form every lender must give you within three business days of receiving your mortgage application. Because every lender uses the same layout, it's the easiest way to compare offers. It isn't a contract or approval, and getting one doesn't lock you in.

Source: CFPB: Loan Estimate explainer.

What can change before closing?

The lender's own fees and services you can't shop for generally can't go up, and certain third-party fees can't rise more than 10% in total. Prepaids, escrow, and services you shop for yourself can change. A revised Loan Estimate is allowed when something legitimately changes, like your loan amount or a rate lock.

Source: 12 CFR 1026.19(e). Full walkthrough: How to read a Loan Estimate.

General education, not legal advice. John Stafford NMLS #2470539 | GoRascalJohn powered by GoRascal Inc. NMLS #2072896. Equal Housing Opportunity.

Common questions

How long is a Loan Estimate good for?

Closing cost estimates are generally good for at least 10 business days; the date is on page 1. An unlocked rate can change any day.

What's the most important section to compare?

Section A, the lender's own origination charges and points, plus page 3's In 5 Years line.

Can you review mine for me?

Yes. Send me your Loan Estimate and I'll look it over myself, free.

Free Loan Estimate review

Got a Loan Estimate? Send it to me.

Send me your Loan Estimate and I'll look it over myself. I'll tell you straight what looks off, what looks fine, and whether I can do better. If your offer is solid, I'll say so.

Text (713) 728-6662DM @GoRascalJohnUse the short form

Before you send it: cover your Social Security number and loan number. Texas and Tennessee loans. John Stafford NMLS #2470539 | GoRascalJohn powered by GoRascal Inc. NMLS #2072896.