What is a Loan Estimate Form?

A Loan Estimate form is a standardized document used in the United States to provide consumers with essential information about the terms and costs associated with a mortgage loan. This form is required by the Consumer Financial Protection Bureau (CFPB) under the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA). The Loan Estimate must be provided by the lender within three business days of receiving a consumer's application for a mortgage. It is designed to help consumers understand the key details of their mortgage offer and make informed comparisons between different loan offers.

The Loan Estimate form includes several important sections:

1. Loan Terms: This section outlines the fundamental terms of the loan, including the loan amount, interest rate, monthly payment, and the estimated total payments over the life of the loan.

2. Projected Payments: This provides a breakdown of the monthly payments, including principal, interest, and any estimated taxes and insurance. It also shows how these payments might change over time.

3. Costs at Closing: This section details the estimated closing costs and any prepaid costs that the borrower will need to pay at the closing of the loan. It includes fees for services such as appraisal, title insurance, and lender's charges.

4. Other Costs: This section includes other costs that may not be directly associated with closing but could affect the total cost of the loan, such as prepayment penalties or late fees.

5. Comparisons: This part helps borrowers compare the loan offer with other offers by providing information on the annual percentage rate (APR), the total interest percentage, and the total closing costs.

6. Other Considerations: This includes details on whether the loan has features such as a balloon payment or the ability to pay off the loan early without penalties.

7. Contact Information: Provides the lender’s contact information for any questions or additional information needed.

The Loan Estimate form is designed to be clear and easy to understand, allowing consumers to make well-informed decisions about their mortgage options. It also provides a consistent format that makes it easier for borrowers to compare different loan offers.