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Mortgage Loan Estimate (LE) Breakdown

Mortgage Loan Estimate (LE) Breakdown

    While the Loan Estimate can be a valuable tool to help you save money on your mortgage, the volume of information it provides can be a little overwhelming. The Loan Estimate is three pages in length and presents information in a series of itemized tables. To help you understand the document and make it more manageable, we provide a comprehensive, page-by-page breakdown of the Loan Estimate, including all line items and tables, below. You can use this detailed information to better understand the Loan Estimate and answer any questions you have about specific items.

    As required by law, the Loan Estimate contains detailed information on the estimated terms of a mortgage, including mortgage rate and closing costs.  The purpose of the Loan Estimate is to enable you to comparison shop multiple lenders to find the mortgage that best meets your needs.  The idea is that you obtain a Loan Estimate from at least four lenders and then compare the terms outlined in the documents to find the loan with the lowest combination of mortgage rate and closing costs.

    Because the Loan Estimate is relatively long and packed with information, we recommend that you print our Example Loan Estimate Document and review the breakdown below as you read and analyze the document.  You can scroll down this page to review each Loan Estimate line item or skip to a specific page by clicking one of the links below.

  • Page 1: Summary of Terms
  • Summary (Top of Form)

    • Borrower contact information
    • Purpose (purchase or refinance)
    • Property being mortgaged
    • Product (fixed rate, adjustable rate, interest only)
    • Property value
    • Loan type (conventional, VA, FHA, other)
    • Loan term (length)
    • Rate lock information
  • Loan Terms

  • Loan Amount
    • Mortgage amount
    • The LE will indicate if this amount can increase after your mortgage closes
    Interest Rate
    • Rate of interest you will pay on the mortgage
    • The LE will indicate if this figure can increase after your mortgage closes
    Monthly Principal & Interest
    • The total of your monthly principal and interest payments on the mortgage
    • Does not include other monthly housing expense such as taxes and insurance
    • The LE will indicate if this amount can increase after your mortgage closes
    Prepayment Penalty
    • Some mortgages require the borrower to pay a penalty if you repay the loan in full prior to a specified term
    • You should avoid prepayment penalties
    • The LE indicates with a YES or NO if the mortgage has a prepayment penalty
    Balloon Payment
    • If your loan has a balloon payment, you are required to pay off the balance of your loan at the end of the term of the loan
    • A loan with a balloon payment typically involves the borrower paying off a significant amount of money at the end of the loan, as opposed to paying the loan off a little bit every month over the life of the loan
    • The LE indicates with a YES or NO if the mortgage has a balloon payment
  • Projected Payments

  • Estimated Total Monthly Payment
    • Breakdown of your estimated total monthly payment including your principal and interest payment, mortgage insurance (if applicable) and any amount you are required to pay into an escrow account (also known as an impound or trust account)
    • Some borrowers are required to pay certain monthly expenses such as homeowners insurance and property tax into an escrow account on a monthly basis along with the mortgage payment
    • Indicates if these figures can change. For example you may be required to pay mortgage insurance for the first seven years of the mortgage so there will be a payment for years 1 - 7 and then a new payment (without the mortgage insurance) for years 8 - 30
    • Or you may have selected an adjustable rate or interest only mortgage where the payment changes after a fixed number of years and the table will reflect how the payments can change in future years
    Estimated Taxes, Insurance & Assessments
    • Estimated monthly property tax, homeowners insurance expense and other applicable monthly expenses including homeowners association dues (HOA)
    • Will indicate if the borrower is required to pay these fees into an escrow account
  • Costs at Closing

  • Estimated Closing Costs
    • Sum of all closing costs including lender and other third party costs
    • A detailed breakdown of closing costs is provided on page two of the LE
    Estimated Cash to Close
    • Total amount of money the borrower must contribute to close the mortgage
    • Amount includes closing costs plus the required borrower down payment contribution
    • A detailed breakdown of estimated cash to close is provided on page two of the LE
  • Page 2: Closing Cost Details
  • Loan Costs

    • ITEM A: Origination Charges. Fees charged by the lender or mortgage broker. The table below outlines potential lender fees a borrower may be required to pay.  A borrower is required to pay some but not all of these fees, depending on the lender
    • Lenders are not permitted to charge consumers more than the amount disclosed on the LE for these costs under any circumstances other than changed circumstances that permit a revised LE

    Please note the last two columns of the table below indicate if cost a item is an up-front or ongoing cost.  Up-front costs occur one time and are called non-recurring closing costs.  Examples include lender, appraisal, title company, escrow and attorney (if applicable) fees.  Ongoing costs are costs that will continue to occur over the life of the mortgage and are called recurring closing costs. Examples include interest (from the day your mortgage closes until the end of the month in which your mortgage closes), homeowner's insurance, pro-rated property taxes and homeowners association fees (if applicable).

  • Item Definition Determining Party Approximate Cost Up-Front Cost (Non-Recurring) Ongoing Cost (Recurring)
    Origination Charges (Origination Points)
    • The total of all broker and lender fees including any origination points (1% of the mortgage amount), administration, commitment or processing fees and other smaller charges
    • Lender
    • ~1.5% - 2.0% of mortgage amount
    • x
    Lender Discount Points
    • The borrower decides whether to pay a discount point or points to obtain a lower interest rate than he or she would otherwise receive
    • A discount point is an up-front fee that represents 1% of the mortgage amount
    • If you pay discount points, your interest rate should be lower than if you do not pay points
    • Lender and borrower
    • 1 point = 1.0% of mortgage amount
    • x
    Underwriting Fee
    • Lender cost for reviewing borrower documents and determining mortgage qualification
    • Lender
    • ~$500
    • x
    Application Fee
    • Lender cost for reviewing borrower mortgage application (cannot be charged when the borrower submits the application)
    • Lender
    • ~$250
    • x
    Administration Fee
    • Lender cost for processing mortgage
    • Lender
    • ~$450
    • x
    Processing Fee
    • Another term for lender cost for processing mortgage
    • Lender
    • ~$450
    • x
    Wire Transfer Fee
    • Lender cost for wiring funds to settlement agent
    • Lender
    • ~$75
    • x
  • ITEM B: Services You Cannot Shop For. Fees charged by non-lender third parties for services or reports required by the lender. The lender selects these third party vendors and the borrower cannot shop around for the lowest-priced vendor.  Additionally, upfront mortgage insurance premium, funding and guarantee fees for FHA, VA and USDA home loans are included in this closing cost category even if the fees are added to the loan amount and not paid for by the borrower out-of-pocket at closing.

    • Lenders are not permitted to charge consumers more than the amount disclosed on the LE for these costs under any circumstances other than changed circumstances that permit a revised LE
  • Item Definition Determining Party Approximate Cost Up-Front Cost (Non-Recurring) Ongoing Cost (Recurring)
    Appraisal Fee
    • Fee to obtain appraisal report
    • Appraiser
    • ~$400
    • x
    Lender’s Attorney Fee
    • A lender may decide to hire an attorney to assist in processing the mortgage
    • Lender
    • ~$500
    • x
    Homeowners Association (HOA) Certification Fee
    • Fee charged by the HOA to provide information on the property
    • Only applicable if property is subject to HOA fee
    • Homeowners Association
    • ~$50 - $300
    • x
    Credit Report Fee
    • Fee charged to obtain a copy of your credit report
    • Lender
    • ~$25
    • x
    Flood Monitoring Fee
    • Fee paid to third party that monitors flood zone maps after the mortgage closes to ensure that the property does not lie in a flood zone due to future government flood zone remapping
    • Borrower, real estate agent or lender
    • ~$40
    • x
    Flood Certification Fee
    • Fee to make sure that the property is not located in a flood plain
    • Lender
    • ~$15
    • x
    Tax Monitoring Fee
    • Fee paid to service that monitors the borrower’s property tax payments after the mortgage closes, on behalf of the lender
    • Borrower, real estate agent or lender
    • ~$75
    • x
    Tax Service Fee
    • Fee to set-up an account with tax service company to make sure you pay your property taxes
    • Lender
    • ~$60
    • x
  • ITEM C: Services You Can Shop For.  Fees for services required to process and close your mortgage that you can shop for and select as the borrower.  Please note that as a borrower you will be charged some but not all of the fees listed in the table

    • For the cost items below, if the borrower selects a service provider on the lender’s “wish list,” the lender may charge the borrower more than the amount disclosed on the LE as long as the total sum of the costs added together does not exceed the sum of the costs disclosed on the LE by more than 10 percent.  If the borrower selects a service provider not on the lender’s “wish list” there is no limit to the increase in cost.
  • Item Definition Determining Party Approximate Cost Up-Front Cost (Non-Recurring) Ongoing Cost (Recurring)
    Home Inspection Report
    • Fee to home inspection company to examine the structural integrity and overall condition of the property. Service performed at the request of the borrower / buyer
    • Borrower
    • ~$500
    • x
    Termite / Pest Inspection
    • Fee to pest inspection company to examine the property for termites and pests. Service performed at the request of the borrower / buyer
    • Borrower
    • ~$50
    • x
    Electronic Document Delivery Fee
    • Fee charged by settlement agent to process and printing electronic documents
    • Settlement agent
    • ~$50
    • x
    Survey Fee
    • Fee to conduct a property survey to locate the property boundaries and make sure the property complies with local zoning regulations
    • Borrower, real estate agent or lender
    • ~$150 - $300
    • x
    Title -- Lender’s Title Policy
    • A fee for title insurance for the lender, which insures the lender in the rare event that there are defects or errors in the property’s title and a party makes a claim against the property at some point in the future
    • Borrower, real estate agent or lender
    • ~$675
    • x
    Title -- Insurance Binder
    • A fee for a temporary title insurance policy for the lender which may be in place until the permanent policy can be issued
    • Borrower, real estate agent or lender
    • ~$675
    • x
    Title -- Title Search
    • Fee paid to a title company or attorney to examine county records to determine the legal ownership of the property and identify any recorded property liens or easements that could interfere with your ability to mortgage the property
    • Borrower, real estate agent or lender
    • ~$650
    • x
    Title -- Settlement Agent Fee
    • Fee paid to the settlement agent (escrow company or attorney) to administer the mortgage closing process and handle the transfer of funds and property ownership through an escrow or trust account
    • Also known as a closing agent or escrow company. In the eastern U.S. an attorney typically serves as the settlement agent
    • Borrower, real estate agent or lender
    • ~$500+ (typically a flat fee of $500 for properties valued up to $200,000 and then $2 per $1,000 in property value above $200,000)
    • x
    Title -- Courier Fee
    • Fee charged by title company to courier documents
    • Title company
    • ~$50
    • x
    Title -- Doc Prep Fee
    • Fee charged by title company to prepare loan documents
    • Title company
    • ~$75
    • x
    Title -- Notary Fees
    • Fee charged by notary through the title company to notarize loan documents
    • Title company
    • ~$150
    • x
  • ITEM D: Total Loan Costs. The total of all loan costs (ITEMS A + B + C)

    Other Costs

    ITEM E: Taxes and Other Government Fees.  Fees paid to local and state governments to record the mortgage

    • Lenders are permitted to charge consumers up to 10% more than the amount disclosed on the LE for the recording charge.  Lenders are not permitted to charge consumers more than the amount disclosed on the LE for the transfer tax under any circumstances other than changed circumstances that permit a revised LE.
  • Item Definition Determining Party Approximate Cost Up-Front Cost (Non-Recurring) Ongoing Cost (Recurring)
    Government Recording Charge
    • State and local fees to record your mortgage and title documents
    • May include grant deed recording charge
    • Local city / county government
    • ~$150
    • x
    Transfer Tax
    • Tax or fee charged by some local city government to transfer property ownership from seller to buyer
    • Cost amount varies but can represent 1% or more of the property purchase price
    • Almost always paid for by the seller
    • Local city government
    • TYPICALLY PAID FOR BY SELLER
    • Cost varies by city
    • Can be 1% or more of the property purchase price
    • x
  • ITEM F: Prepaids.  Fees for items or services paid for in advance through the mortgage closing process

    • For the cost items below the lender may charge the borrower more than the amount on the LE without any limit because these items are either selected by the borrower (homeowners insurance) or depend on the date the mortgage closes (prepaid interest, mortgage insurance premium, property tax)
  • Item Definition Determining Party Approximate Cost Up-Front Cost (Non-Recurring) Ongoing Cost (Recurring)
    Homeowners Insurance
    • Charge to buy homeowners insurance, which is mandatory when you purchase a property
    • Also referred to as Hazard Insurance
    • Borrower
    • ~0.1% - 0.2% of the property purchase price
    • x
    • x
    Prepaid Interest
    • Daily interest charge on your mortgage from the day of settlement (mortgage closing) until the end of the month
    • Lender
    • Depends on interest rate and number of days from date of mortgage closing to first day of the next month
    • x
    • x
    Mortgage Insurance Premium
    • If your loan-to-value (LTV) ratio exceeds 80% or if you obtain an FHA or USDA mortgage you will likely be required to pay mortgage insurance premium on a monthly basis
    • The borrower may be required to pay mortgage insurance premium one-to-two months in advance
    • Lender
    • Depends on mortgage size, term and LTV ratio
    • x
    Property Tax
    • Any property tax the borrower is required to pay in advance
    • Property taxes vary by county and can range from 0.5% to 3.0% of the value of the property
    • Local government
       
    • x
  • ITEM G: Initial Escrow Payment at Closing.  The lender may require that the borrower deposit extra money in an escrow account to cover one-to-four months of property taxes and up to two months of homeowners insurance and mortgage insurance (if applicable) as a cushion.  This money is in addition to any prepaids the borrower is required to make (ITEM F)

    • For the cost items below the lender may charge the borrower more than the amount on the LE without any limit because these items are either selected by the borrower or depend on the date the mortgage closes
  • Item Definition Determining Party Approximate Cost Up-Front Cost (Non-Recurring) Ongoing Cost (Recurring)
    Initial Escrow Deposit
    • The lender may require the borrower to pay for property tax, homeowner's insurance and other fees such as private mortgage insurance (PMI) or mortgage insurance premiums up-front
    • The payment for these fees are deposited in an impound account and then distributed to the appropriate parties when payment is due
    • If you are not required to pay into an impound account, then this item should be $0
    • Local government (tax)
    • Homeowner's insurance company
    • Lender / government agency (FHA)
    • Property tax (~1% of property purchase price)
    • Insurance (~0.1% - 0.2% of the purchase price )
    • PMI (.20% - 1.65% of mortgage amount)
    • x
    • x
  • ITEM H: Other. Other potential borrower expenses

  • Item Definition Determining Party Approximate Cost Up-Front Cost (Non-Recurring) Ongoing Cost (Recurring)
    Owner’s Title Insurance
    • Fee charged to purchase title insurance for buyer
    • Title insurance that insures the buyer in the rare event that there are defects or errors in the property's title and a party makes a claim against the property at some point in the future
    • Seller
    • TYPICALLY PAID FOR BY SELLER
    • ~$1,500
    • x
  • ITEM I: Total Other Costs. Total of all other costs (ITEMS E+F+G+H)

    ITEM J: Total Closing Costs. Total Loan Costs (ITEM D) plus Total Other Costs (ITEM I) less any lender credits. This figure includes all non-recurring (one-time) and recurring (ongoing) closing costs the borrower is required to pay. You may also receive a rebate of lender fees, which is called a credit. This occurs when the interest rate charged by the lender is higher than the market rate

    Calculating Cash to Close: Table that calculates the total amount of money the borrower must contribute to close the mortgage including the down payment and total closing costs less any deposit the borrower has made and any other credits or adjustments

    For Adjustable Rate and Interest Only Mortgages. If you select an adjustable rate mortgage (ARM) or Interest Only Mortgage, your LE will include the following table at the bottom of page 2:

  • Adjustable Payment (AP) Table
    • Indicates if you are making interest only payments, optional payments, step payments or seasonal payments
    • Also indicates a range of estimated mortgage payments at the first adjustment period, how often the payment can change after the first adjustment (adjustment interval) and the maximum possible payment amount and when the maximum payment can occur
    Adjustable Interest Rate (AIR) Table
    • Indicates the index and margin for when the interest rate is subject to change, the initial interest rate, minimum and maximum interest rate
    • Indicates when the rate can initially adjust and how frequently it can adjust thereafter (adjustment interval)
    • Indicates the limit on the change/increase in interest rate at the first adjustment period (initial cap) and subsequent adjustment periods (life cap)
  • Page 3: Additional Information About This Loan
  • Lender Summary (Top of Form).  Lender name, contact and license information. If you are working with a mortgage broker, will also include mortgage broker name, contact and license information.

    Comparisons

  • In 5 Years
    • Indicates the total amount you have paid in principal, interest, mortgage insurance and loan costs
    • Also indicates the total amount of principal you have paid off
    Annual Percentage Rate (APR)
    • In short, the APR represents what your mortgage interest rate would be if it included all up-front lender and closing costs, such as points and origination and processing fees, in addition to interest expense
    • The APR provides another way for you to review and compare mortgage fees
    • If the APR is close to your interest rate then you know that the lender and mortgage costs are relatively small. If the APR is much higher than your interest rate then you know that the lender and mortgage costs are relatively high and you may want to negotiate lower costs or change lenders
    • We provide a comprehensive explanation and example of the APR for a mortgage FREEandCLEAR
    Total Interest Percentage (TIP)
    • Indicates the the total amount of interest that you will pay over the loan term as a percentage of your loan amount
  • Other Considerations

  • Appraisal
    • Indicates you will be given a copy of the appraisal report if the lender orders one. Also indicates you can order your own appraisal report at your own cost
    Assumption
    • Indicates if you can transfer the mortgage to a third party without permission of the lender
    Homeowners Insurance
    • Indicates if homeowners insurance is required (it almost always is)
    Late Payment
    • Indicates when your monthly mortgage payment is considered late (how many days) and what the penalty is
    Refinance
    • Indicates you may not be able to refinance the mortgage. You ability to refinance the mortgage in the future is subject to your financial situation, property value and market conditions in the future
    Servicing
    • Indicates if the lender intends to keep and service your mortgage or transfer the servicing to a third party
    • This will help you determine who you make your monthly mortgage payment to
  • Rate Details*
    Loan Program:  
    Monthly Payment:  
    APR:  
    Rate:  
    Points  More Info:
    Points: Fees you are willing to pay in order to get a lower interest rate. The number of points refers to the percentage of the loan amount that you would pay. For example, "2 points" means a charge of 2% of the loan amount.
     
    Total Lender Fees:  
    Loan type:  
    Property Value:  
    Loan to Value:  
    Credit Rating:  
    Date Submitted:  
    Monthly Housing Payments
    P & I More Info
    Principal & Interest: A periodic payment, usually paid monthly, that includes the interest charges for the period plus an amount applied to the reduction of the principal balance.
    Mortgage Insurance More Info
    Mortgage Insurance: The monthly cost for a policy that protects the lender in case you’re unable to repay the full amount of the loan. It is typically required for loans that have a loan-to-value ratio between 80% to 100%.
    (Estimated)
    Property Tax More Info
    Property Tax: (Also called "Real Estate Tax.") Property taxes are government assessments on real estate property. With mortgage financing, the local, county or state tax assessment on real estate property is considered part of the monthly housing obligation and typically collected and set aside by the lender ...
    (Estimated)
    Homeowner Insurance More Info
    Homeowner Insurance: or also commonly called hazard insurance, is the type of property insurance that covers private homes. It is an insurance policy that combines various personal insurance protections, which can include losses occurring to one’s home, its contents, loss of its use, or loss of other personal possessions of the homeowner, as well as liability insurance for accidents that may happen at the home or at the hands of the homeowner within the policy territory.lender ...
    (Estimated)
    Homeowner Association Fee More Info
    Homeowner Association fee: (HOA) fees are funds that are collected from homeowners in a condominium complex to obtain the income needed to pay (typically) for master insurance, exterior and interior (as appropriate) maintenance, landscaping, water, sewer, and garbage costs.
    (If Any)
    Total Monthly Housing Payments
    Lender Fees
    Points More Info
    Points Fees you are willing to pay in order to get a lower interest rate. The number of points refers to the percentage of the loan amount that you would pay. For example, "2 points" means a charge of 2% of the loan amount.
    Origination Fee More Info
    Origination Charge: A loan origination charge is a fee charged by the lender for evaluating, processing, and closing the loan.
    Credit Report Fee More Info
    Credit Report Fee: Fee charged to obtain an applicant’s credit history prepared by one or all of the three major credit bureaus. Used by lender to determine the borrower’s creditworthiness.
    Tax Service Fee More Info
    Tax Service Fee: A fee charged by the lender to cover the cost of retaining a tax service agency. These agencies monitor the property tax payments on the property and report the results to the lender.
    Processing Fee More Info
    Processing Fee: A processing fee is a charge by the lender for clerical items associated with the loan. Examples of processing include loan set up, organization of loan conditions for underwriting, and preparing required disclosures for the borrower.
    Underwriting Fee More Info
    Underwriting Fee: A fee charged by the lender to verify information on the loan application, authenticate the property’s value, and perform a risk analysis on the overall loan package.
    Wire Transfer Fee More Info
    Wire Transfer Fee: In most cases lenders wire funds to escrow companies to fund a loan. Commercial banks that perform this function will charge the lender so the fee is generally passed on to the borrower.
    (If Any)
    FHA Upfront Premium More Info
    FHA Upfront Premium: A fee paid in cash at the close of escrow or more commonly it is financed into the loan. These premiums are pooled together by the FHA and are used to insure the risk of borrower default on FHA loans. FHA upfront premiums are prorated over a five year period, meaning should the homeowner refinance or sell during the first five years of the loan, they are entitled to a partial refund of the FHA upfront premium paid at loan inception.
    (If any)
    VA funding Fee (If any)
    Flood Fee
    Other Fees More Info

    Other fees could be either additional Administrative Fees that a lender charges or it could be a Flat Fee to cover all lender charges such as: (Origination Fees, Points, Underwriting and Processing Fees, Credit Reports and Tax Service Fees)

    The flat fee does not include prepaid items and third party costs such as appraisal fees, recording fees, prepaid interest, property & transfer taxes, homeowners insurance, borrower’s attorney’s fees, private mortgage insurance premiums (if applicable), survey costs, title insurance and related services.

    Total Lender Fees
    *Actual rates and other information may vary. Sponsored results shown only include participating lenders. The information you enter on this page will only be shared with lenders you choose to contact, either by calling the phone number or requesting a quote.
    Current Mortgage Rates as of December 11, 2018
    • Lender
    • APR
    • Loan Type
    • Rate
    • Payment
    • Fees
    • Contact
    Data provided by Informa Research Services. Payments do not include amounts for taxes and insurance premiums. The actual payment obligation will be greater if taxes and insurance are included. Click here for more information on rates and product details.
  • Sources

    Loan Estimate: https://www.consumerfinance.gov/ask-cfpb/what-is-a-loan-estimate-en-1995/

About the author

Michael Jensen, Mortgage and Finance Guru

Michael is the co-founder of FREEandCLEAR. Michael possesses extensive knowledge about mortgages and finance and has been writing about mortgages for nearly a decade. His work has been featured in leading national and industry publications. More about Michael

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