Loan Estimate: What Does It Mean?

A Loan Estimate is a standardized, three-page document that lenders are required to provide within three business days of receiving a mortgage application. It outlines the key terms of the proposed loan, including the estimated interest rate, monthly payment, closing costs, and any potential prepayment penalties or balloon payments. The form is designed to make it easy to compare offers from multiple lenders side by side. While it is not a final commitment from the lender, the estimated costs must be reasonably accurate, and certain fees cannot increase at closing. Reviewing the Loan Estimate carefully is one of the most important steps in the home-buying process.