What is a loan estimate?

A loan estimate is a vital document in the mortgage origination process, specifically designed to give borrowers clear and concise information about the key features, costs, and risks associated with a mortgage loan. It is required by the Truth in Lending Act and the Real Estate Settlement Procedures Act. The loan estimate provides details such as the loan amount, interest rate, monthly payments, and closing costs, enabling borrowers to compare different loan offers and make informed decisions.

This document serves as an important tool for transparency, ensuring that borrowers understand the financial implications of the loan they are considering. By presenting these critical components in a standardized format, the loan estimate helps facilitate a smoother transaction process and supports better planning and budgeting for the borrower.