What is a Loan Estimate?
A Loan Estimate is a standardized 3-page document that every mortgage lender must give you within 3 business days of receiving a complete application. It shows your projected interest rate, monthly payment, closing costs, and loan terms — allowing you to compare offers from multiple lenders on an apples-to-apples basis.
A Loan Estimate (formerly known as the Good Faith Estimate) is a federal disclosure required under RESPA (Real Estate Settlement Procedures Act) and TILA (Truth in Lending Act). Lenders must provide it within 3 business days of receiving a complete mortgage application — and they cannot charge you any fee besides a reasonable credit report fee before giving it to you. It replaced the older Good Faith Estimate and Truth in Lending disclosure in 2015.
What the Loan Estimate covers
- Page 1 — loan terms (amount, rate, monthly payment, prepayment penalty, balloon payment if any) and projected monthly payment breakdown (principal, interest, taxes, insurance, PMI).
- Page 2 — itemized closing costs organized by category: loan costs (origination, points, appraisal, credit report) and other costs (taxes, prepaids, escrow setup).
- Page 3 — comparisons (APR, total interest percentage over the loan life), contact information, and a comparison table for shopping.
- Total cash to close — how much you need at the closing table including down payment and closing costs.
Tolerance limits: what lenders can and can't change
Not all numbers on the Loan Estimate are locked. The CFPB explains that some costs have zero tolerance (they can't increase at all from the Loan Estimate to the Closing Disclosure), some have 10% aggregate tolerance, and some — like title insurance for a provider you choose — can change without limit. Knowing which bucket applies helps you catch errors before closing.
- Zero tolerance (can't increase): lender fees (origination, underwriting, points), transfer taxes.
- 10% tolerance: recording fees, certain third-party services from the lender's required list.
- No tolerance limit: prepaid interest, insurance, services from a provider you choose yourself.
How to use the Loan Estimate to compare lenders
Request Loan Estimates from 3 or more lenders on the same day for the same loan type and down payment. Compare the total interest percentage (TIP) on page 3 — it's the most comprehensive cost comparison across different rate-and-fee structures. Also compare the total closing costs and the origination charges specifically. A lower rate with high points may cost more total than a slightly higher rate with low fees.
Sources
- Lenders must provide a Loan Estimate within 3 business days after receiving a completed mortgage application and cannot charge fees (except a reasonable credit check fee) before giving it to you. — CFPB — What Is a Loan Estimate?
- Certain costs on a Loan Estimate — primarily lender fees and transfer taxes — have zero tolerance, meaning they cannot increase from the Loan Estimate to the Closing Disclosure. — CFPB — RESPA Tolerance Limits
- The Loan Estimate replaced the Good Faith Estimate (GFE) and the Truth in Lending Act disclosure form effective October 3, 2015, under the CFPB's TRID (TILA-RESPA Integrated Disclosure) rule. — CFPB — TRID
Key takeaways
- A Loan Estimate is a required 3-page disclosure you receive within 3 business days of a complete mortgage application.
- It replaced the Good Faith Estimate in 2015 under the CFPB's TRID rule.
- Use the total interest percentage (TIP) on page 3 to compare total cost across lenders.
- Zero-tolerance costs (lender fees, transfer taxes) cannot increase at closing — watch for violations.
- Get Loan Estimates from at least 3 lenders on the same day for an accurate comparison.
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