Loan Estimate

A loan estimate is a three-page document you receive from your lender after applying for a mortgage. The loan estimate breaks down your costs, including your down payment, taxes, insurance, and lender fees, and lumps it into one figure called “cash-to-close”. 

What is a loan estimate?

Three business days after applying for a mortgage, or home loan, your lender will provide you with a document called a loan estimate. The loan estimate contains the terms you’ll be presented with if you accept the loan – but it doesn’t mean your application is accepted yet. The document also includes your estimated interest rate, monthly payment, and total closing costs. 

The loan estimate document tells you how much you should expect to pay on taxes and insurance, and how the interest rate and payments on your mortgage may change in the future. Each form looks exactly the same, which makes it easy to compare lenders’ estimates.  

A loan estimate shouldn’t be confused with a closing disclosure, although they’re similar. A closing disclosure is a five-page document you’ll receive from your lender at least three business days before you close on your loan. You’ll want to compare your closing disclosure against your loan estimate to check the final terms and costs.  

Can a loan estimate change?

There are certain costs in your loan estimate that can change, like interest rate. However, fees paid to the lender, and transfer taxes, won’t. If some of your costs do change, you’ll be presented with a revised loan estimate from your lender. Your loan estimate clearly lists whether each amount can increase after closing.

What’s in a loan estimate?

Your loan estimate is three pages long. The first page lists the most important information, like the terms of your loan and closing costs. The second page shows your loan costs and origination charges, such as lender fees, aka “application fee” or “underwriting fee.” These are negotiable, so compare them with other lenders when mortgage shopping

Page three of your estimate lists the ‘percent paid in interest,’ ‘APR’ (annual percentage rate) and ‘total cost in five years’- (total charges you’ll incur). You can see a sample of page three on a loan estimate below.

loan estimate example

 

Please Note: These definitions don’t alter the terms, conditions, exclusions, or limitations of policies issued by Lemonade. They are intended for educational purposes only - they’re not meant to be used in lieu of professional legal or financial advice. We’ll do our best to keep them updated, but they may not always reflect current industry developments. Feel free to use the terms with attribution (friends don’t let friends plagiarize!)
Property and casualty insurance provided by Lemonade Insurance Company, 5 Crosby St., 3rd floor, New York, NY 10013. Life Insurance provided by North American Company for Life and Health Insurance®, Administrative Office, One Sammons Plaza, Sioux Falls, SD 57193.
Lemonade Insurance Agency, LLC (LIA) is acting as the agent of Lemonade Insurance Company and Lemonade Life Insurance Agency, LLC (LLIA) is acting as the agent of North American Company for Life and Health Insurance®. Both LIA and LLIA receive compensation based on the premiums for the insurance policies each sells. Further information is available upon request.
LLIA is a sub-producer of Bestow Agency, LLC. Life insurance quotes are provided by Bestow Agency, LLC dba Bestow Insurance Services in CA, who is the licensed agent. Term Life insurance policies are issued on North American Company for Life and Health Insurance® policy form LS181 and LS182, or state version including all applicable endorsements and riders. Products or issue ages may not be available in all jurisdictions. Limitations or restrictions may apply. Not available in New York. Our application asks about your lifestyle and health; your answers allow us to save you time and avoid offline medical exams.