What is a Loan Estimate? | Consumer Financial Protection Bureau (2024)

FAQs

What is a Loan Estimate? | Consumer Financial Protection Bureau? ›

The Loan Estimate shows you what loan terms the lender expects to offer if you decide to move forward. If you decide to move forward, the lender will ask you for additional financial information. See a sample Loan Estimate form with interactive tips and definitions.

When you apply for a mortgage, your lender is required to give you a Loan Estimate: a standardized form that gives you important details about the mortgage you're applying for. The mortgage Loan Estimate includes your estimated interest rate, monthly payment, closing costs and other details.

Loan estimate. The Loan Estimate is designed to provide information to help borrowers understand the key features, costs, and risks of the mortgage loan for which they are applying.

You want accurate figures. At Homebuyer and plenty of other lenders, these costs get estimated as close to 100 percent accurate as possible. Remember that numbers are never exact upfront. Don't worry about any estimated fees that your lender doesn't dictate.

The loan estimate can help you understand any mortgage you apply for, whether you're buying a home or refinancing one. For the amount, type, and term of the loan you've applied for, the loan estimate will show your projected closing costs, monthly payment, interest rate, and annual percentage rate, among other details.

When you receive a Loan Estimate, the lender has not yet approved or denied your loan. This is true even if your rate is already locked. The Loan Estimate shows you the terms the lender expects to offer you if you decide to move forward with your loan application. You have not committed to this lender.

Technically, a loan estimate is only binding on the date it's issued. The lender has to give you the loan, with exactly the terms listed in the loan estimate, if on that day you take steps to accept the loan and lock your rate in.

If there is more than one consumer the Loan Estimate may be provided to any consumer who is primarily liable on the obligation. If one consumer is merely a surety or guarantor then the Loan Estimate must be given to the principal debtor.

The Closing Disclosure is a five-page form that presents all the information found in the Loan Estimate but in a finalized form. It shows how much you'll actually pay if you go through with closing and take on the loan.

Your lender is allowed to change the costs on your Loan Estimate only if new or different information is discovered in the process (such as the examples above). If you think your lender has revised your Loan Estimate for a reason that's not valid, call your lender and ask them to explain.

What triggers a new loan estimate? ›

You took out a new loan or missed a payment on another loan, and your credit score has changed. Your lender could not verify your overtime, bonus, or other income. The interest rate on your loan was not locked, and locking the rate caused the points or lender credits to change.

Under the TRID rule, credit unions generally must provide the Loan Estimate to consumers no later than seven business days before consummation. Members must receive the Closing Disclosure no later than three business days before consummation.

However, there are some fees listed on your loan estimate that legally cannot change. These include fees paid to a broker and transfer taxes. If there are any changes of circ*mstance, you receive a revised loan estimate.

Loan estimates are issued after you fill out a lender's application — within three days or less. The form will detail the terms of the loan they're offering you. You can then use this to compare different lenders on terms, interest rates, closing costs, and other details.

There is no requirement for the loan estimate to be signed, regardless of the delivery method. So, you should be okay with other documentation in the file showing when the loan estimate was delivered.

Getting multiple Loan Estimates won't hurt your credit, so long as you get them all within the same 45-day window. Learn why, and what happens when a lender checks your credit.

A loan estimate is not a pre-approval or approval for a mortgage loan. It only shows you what the lender expects to offer if you decide to move forward with the loan. If you choose to move forward, formal underwriting will determine if you are approved for the loan.

Here are some common reasons why the estimated charges in your Loan Estimate might increase: You decide to change the kind of loan, for example moving from an adjustable-rate to a fixed-rate loan. You decide to reduce the amount of your down payment. The appraisal on the home you want to buy came in lower than expected.

Two key documents, especially for first-time homebuyers, are the loan estimate and the closing disclosure. The former provides important details about your lender's mortgage offer, while the latter finalizes those details for closing.