Navigating the Loan Estimate: Page 1 - Loan Terms, Projected Payments and Costs at Closing
Decoding Page 1 of your LE
The Loan Estimate (LE) is where you will look to confirm your proposed rate, monthly payment, and closing costs. It became an industry-standard document in 2015 and was designed to make it easier for you to compare offers from different lenders. Similar to the original application (form 1003, or the Uniform Residential Loan Application), the Loan Estimate is not final. However, certain costs on the Loan Estimate cannot change after you lock in your rate unless there is a legitimate change in circumstance during the course of the loan process (changes in circumstance include property type changes, loan amount changes, appraised value changes, or purchase price changes). The costs that cannot change are found on Page 2 section A of the Loan Estimate. All other fees are third-party and can only be estimated at this point in the process.
This article will dive into page 1 of the Loan Estimate, which includes loan terms, projected payments, and costs at closing.
What’s on Page 1?
Page 1 of your Loan Estimate is important because it lists the key details of your transaction. If any of the information on the top portion of this page is incorrect, it is important to let your Loan Officer know, as we may need to issue you a new Loan Estimate. Below, you will find an example loan estimate and details of each section on page 1.
When reviewing this page, you will want to make sure your Transaction Details & Loan Terms are correct. This includes the following:
- Name (Applicants).
- Property Address.
- Purchase price & loan amount.
- Rate locked or not locked & lock expiration date.
- Product - fixed or adjustable.
- Purpose - purchase or refinance.
- Loan term, interest rate, principal & interest payment correct.
- Balloon & Prepayment penalties (should always be "no").
The middle section will show your Projected Payments and include the following:
- Principal & Interest.
- Mortgage Insurance. If your LTV is > 80% you will be required to pay for Monthly Mortgage Insurance.
- Estimated Escrow - monthly property tax + monthly HOI payment.
- Most lenders will allow you to waive escrow via an escrow waiver as long as your down payment is 20% or more.
- HOA Fees, Condo Assoc. Fees & Other Property Related Fees are added to the Estimated Taxes, Insurance & Assessments section. These fees are paid separately from your mortgage payment so they are not included in the Estimated Total Monthly Payment. This means that they are not included in escrow.
The final section shows the estimated Costs at Closing. The Estimated Closing Costs of the loan are broken down in more detail on page 2 of the Loan Estimate. Your Estimated Cash to Close is easy to calculate: Estimated Cash to Close = Down Payment + Estimated Closing Costs. This is the amount you will have to pay at closing, in addition to any money you have already paid. This payment is usually made by cashier’s check or wire transfer. You will need to provide your lender with proof of the source of these funds.
Please note that the monthly payment shown is not final at this point in the process. We often see borrowers concerned that their monthly payment is not accurate, because property taxes and homeowners insurance are just estimates at this stage.
→ Continue to the next article in this series, Navigating the Loan Estimate: Page 2 - Closing Costs