Loan Estimate
A Loan Estimate is a standardized three-page document that lenders must provide to borrowers within three business days of receiving a mortgage application. It details the estimated loan terms, projected monthly payments, and closing costs in an easy-to-compare format.
Example
“The loan estimate showed that Maria's monthly payment would be $2,847, including principal, interest, taxes, and insurance.”
Memory Tip
Remember 'estimate' sounds like 'guesstimate' - it's the lender's best guess of what your loan will cost before you sign.
Why It Matters
The Loan Estimate allows borrowers to shop and compare offers from different lenders on an apples-to-apples basis, ensuring they understand all costs before committing to a loan. It also provides legal protections by limiting how much certain fees can increase between the estimate and closing.
Common Misconception
Borrowers often think the Loan Estimate represents final, unchangeable numbers, but it's an estimate that can be revised based on changes in loan terms, property details, or market conditions.
In Practice
When a buyer applies for a $300,000 mortgage, the lender provides a Loan Estimate showing an estimated monthly payment of $1,800, closing costs of $8,000, and an interest rate of 6.5%. The buyer can use this to compare against estimates from other lenders before making their final choice.
Etymology
From Latin 'aestimare' meaning 'to value' or 'to appraise,' originally used by Roman merchants to calculate the worth of goods before purchase.
Common Misspellings
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