Routing # 256078446
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What is a Loan Estimate?
What you'll learn: Discover what is in a mortgage loan estimate.
EXPECTED READ TIME: 5 MINUTES
December 3, 2021 | Updated January 8, 2024
A loan estimate is a three-page document sent to most loan applicants, depending on the mortgage product, detailing important loan information including terms, projected payments, closing costs (cash to close), and more. This document is meant to help you understand the full financial implications of moving forward with a loan and is provided in a standard format for easy comparison with other lenders. As required by the Consumer Financial Protection Bureau (CFPB), lenders must issue your loan estimate within three business days of receiving your application.
Note, this is not an approval of your loan application. Loan estimates are just that—approximations of the costs you are applying for, so some things may be subject to change. For example, loan details or the interest rate could potentially change, in which case, you would receive a revised estimate. Remember, a loan estimate is not a guarantee that you will be approved, and similarly, the interest rate on a loan estimate is not final until you lock in your rate.
You will receive a document known as the closing disclosure three business days before closing. This three-business-day window gives you time to thoroughly review the document to avoid any surprises at the closing table. Unlike the loan estimate, a closing disclosure represents the final details and actual costs involved with your loan. It is important to keep your loan estimate on hand so you can compare it with the closing disclosure and keep track of any changes.
So, what exactly is included in the loan estimate?
Here are some of the key items you will want to look for when you receive the document:
- Loan term (length of the loan)
- Total potential amount you plan to borrow
- Projected interest rate
- Notification if interest rate can change in the future
- Approximate principal and interest
- Details to note, such as prepayment penalties and balloon payment
- Approximate total monthly payment
- Mortgage points—if you are paying points to reduce the interest rate
- Projected tax and insurance costs
- Total estimated and itemized closing costs
- Total estimated cash to close
As you read through each page, make sure to ask your loan officer any questions you may have. They are there to help you through each step of the home buying process!
Loan estimates page by page
Page One
On the first page, you will find high-level information like the loan amount, interest rate, and projected monthly principal and interest. It will also detail your loan terms as well as the projected payments throughout the life of the loan you are applying for, including the estimated closing costs and cash to close.
You will want to pay close attention to whether the amounts that are stated can change after closing. Be sure to also check whether or not you can incur penalties if you choose to pay off the loan early.
Page Two
The second page will lay out the costs involved with receiving the loan itself, as well as other costs you may be expected to pay at the time of closing. These will include, but are not limited to, the origination charge, underwriting fee, appraisal fee, the credit report fee, title fee, mortgage insurance premiums, and property taxes.
All of these fees on this page are calculated into one figure, known as “Estimated Cash to Close.” It is the amount you need to pay when you close the loan.
Page Three
The third page is also the final page of the document. It will include information regarding your lender, comparison rates (to use when looking through other estimates), and other important information about late payments and refinancing policies.
Review this section carefully to ensure you fully understand your responsibilities and options for selling the property or refinancing the loan in the future.
Are loan estimates required for any kind of mortgage application?
The short answer is no—a loan estimate is not a requirement for every type of mortgage. Reverse mortgages and home equity lines of credit (HELOCs) are good examples. Instead, they may use a Good Faith Estimate and a Truth-in-Lending disclosure.
As soon as you get your mortgage loan estimate, give your loan officer a call to review it with them. There is a lot of information to look over, and it is vital to understand everything before you move forward in the home buying process.
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Home Buying Steps
Mortgage Products
Disclosures
1Conventional Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.0 discount point, which equals 1.0 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 75%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
2FHA Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.0 discount point, which equals 1.0 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 96.5%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
3VA Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.125 discount point, which equals 1.125 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $450,000; loan-to-value ratio of 95%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of $995.
4Jumbo Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 0.625 discount point, which equals 0.625 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, non-conforming, fixed-rate loan. Loan amount of $1,009,000; loan-to-value ratio of 70%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
Fixed Rate Advance Lock-In You may lock in an Annual Percentage Rate for Advances during the Advance Period. During your Advance Period, you may choose to have three separate Fixed Rate Advances locked in at any one time, with a maximum of two new Fixed Rate Advances per calendar year. Each Fixed Rate Advance must equal or exceed Ten Thousand Dollars ($10,000.00) and you may not request a Fixed Rate Advance that would cause the amount you owe to exceed your Credit Limit. The only term option for your Fixed Rate Advance is 240 months (“Fixed Rate Advance Term”). However, the term of your Fixed Rate Advance cannot exceed your Repayment Period.
Routing #256078446
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