Chris O'Shea
If you’re shopping for a house, a loan estimate is your friend. A loan estimate is a form that tells you all the important information that you need to know about your mortgage. Importantly, the form is used by all lenders, but is not a guarantee of a loan. If you like what you see from the estimate, you move forward. Let’s break down what you can expect from a loan estimate.
Details First
As USA Today notes, the top of the loan estimate form lays out the brief details of the loan, which includes the loan amount, interest rate, monthly principal and interest and any prepayment penalties.
Loan Amount
The loan amount section lists which expenses are fixed and which are not. This is where you find out if the loan is worth taking or moving on and shopping around.
Comparisons
This section gives you a snapshot of the financial obligations you can expect if you take out this loan including:
-
1. Your projected standing five years down the road.
2. The APR of the loan.
3. The total amount of interest you’ll pay over the life of the loan.
Closing Costs
As you shop around for the best deal, you’ll notice that fees can vary widely. One section in which you’ll likely see a difference is the closing costs. This section lays out how much your closing costs will be and how much cash you’ll need when you close.
Projected Payments
This section lays out how much you’ll pay each month. The monthly payment is based on the interest and terms of the loan. Keep in mind that this projection does not include property taxes or homeowners insurance premiums.
