Compare Mortgage Offers (Loan Estimates)

How to compare Loan Estimates

Every lender must give you the same three-page Loan Estimate, so offers can be compared line by line. The Consumer Financial Protection Bureau suggests comparing the interest rate, the monthly principal and interest, the upfront loan costs in Section D on page 2 (especially origination charges), lender credits, and the “In 5 years” line on page 3. This calculator puts those lines side by side.

The total cost over your stay adds what you pay the lender upfront (Section D minus lender credits), the interest you pay while you keep the loan, and any mortgage insurance. Principal is left out because it is your own equity. A lower rate with higher fees usually wins only if you keep the loan long enough; a lender credit helps most if you expect to sell or refinance soon.

Rates can change daily, so compare Loan Estimates issued on or close to the same day. Your strongest negotiating tool, in the CFPB's words, is “having Loan Estimates from other lenders in hand.”

Common questions

Start with the interest rate, the monthly principal and interest, Section D (Total Loan Costs) on page 2 and any lender credits, then check the “In 5 years” line on page 3. Comparing only the rate can mislead when one lender charges points.

No. In the default example, Offer B has the lowest rate but costs $3,200 more upfront than Offer A. It still wins over 7 years because it saves about $53 a month; over a shorter stay, the cheaper-upfront offers can win.

A rebate from the lender that offsets your closing costs, usually in exchange for a higher interest rate. They lower what you pay upfront but raise your monthly payment.

The Loan Estimate also counts mortgage insurance changes and rounding. If your number differs by a few hundred dollars, check the mortgage insurance amounts. A big difference usually means a typo in the loan amount or rate.

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