How to Read a Loan Estimate: A Line-by-Line Guide

The top-right block confirms the basics — loan amount, term, product, purpose. Below it, three tables do the real work:

• Loan Terms. The interest rate, monthly principal & interest, and — critically — the "Can this amount increase?" column. For a fixed-rate loan every answer should be No. Any Yes means an adjustable rate, a balloon payment, or a prepayment penalty, and deserves a direct question to the lender.
• Projected Payments. Your full monthly outlay including mortgage insurance and estimated escrow. Watch for a payment that steps up after year 1 — that is mortgage insurance or an ARM adjustment, not a typo.
• Costs at Closing. Two summary numbers: Estimated Closing Costs and Estimated Cash to Close. Useful as totals, useless for comparison — the breakdown on page 2 is where offers are actually compared.

Page 2 splits every dollar into lettered sections. The letters matter because they separate what the lender charges from what everyone else charges:

• A. Origination Charges. The lender's own price: origination or application fees, underwriting, processing, and any discount points. This is the most negotiable section on the form. Median across 2025 purchase loans: $1,890 — a useful anchor when your Section A runs far higher.
• B. Services You Cannot Shop For. Third-party services the lender picks: appraisal, credit report, flood certification. You can't choose the vendor, but the amounts still count toward the lender's accuracy obligations (more below).
• C. Services You Can Shop For. Title work, settlement agent, survey. The lender must give you a list of providers, but in most states you may pick your own — and title fees vary enough to be worth a phone call on larger loans.
• D. Total Loan Costs = A + B + C. The comparison number. This is what federal HMDA data reports for every closed loan, and it is the number our competitiveness guide benchmarks by state.
• E. Taxes and Government Fees. Recording fees and transfer taxes. Set by your county and state, not the lender.
• F. Prepaids and G. Initial Escrow. Homeowner's insurance, prepaid interest, and the escrow account's opening deposit. These depend on your closing date and insurer. A lender who lowballs them looks cheaper today and gets trued up at closing — never compare offers on E, F, or G.
• H–J. Other, totals, and lender credits. Owner's title insurance (optional but usually wise) lands in H. Lender credits appear as a negative number in J — money the lender pays toward your costs, almost always in exchange for a higher rate.

Benchmark medians on this page are computed from 2,706,510 first-lien purchase loans in the public CFPB HMDA 2025 dataset — see the methodology. HMDA's "total loan costs" corresponds to Section D only; never compare it against your full closing costs including Sections E–J.

Three numbers built for comparing offers, each with a catch:

• In 5 Years. Total dollars paid in the first five years, and how much principal you will have paid off. The most honest single comparison number on the form, because it captures rate and fees on a realistic horizon.
• APR. The rate with most lender costs baked in. A wide rate-to-APR gap = heavy fees. Compare APRs only across offers with the same loan term and type.
• TIP (Total Interest Percentage). Total interest over the full term as a percentage of the loan. Startling on any 30-year loan (often 100%+) — informative, rarely decision-driving.

Federal "tolerance" rules hold lenders to the estimate with three levels of strictness:

• Zero tolerance: Section A, transfer taxes, and Section B services. These may not increase at closing at all, absent a valid "changed circumstance" (like a different loan amount or a re-locked rate).
• 10% tolerance: recording fees and Section C services when you use a provider from the lender's list. The sum may rise at most 10%.
• No tolerance limit: prepaids, escrow, insurance, and services where you chose your own provider. These float with reality.

If a zero-tolerance number grows at closing without a documented changed circumstance, the lender owes you a refund of the difference — that is a legal obligation, not a courtesy. Our Loan Estimate vs. Closing Disclosure guide covers how to run that comparison.