How to Read a Loan Estimate

When you're buying a home or refinancing, you'll receive a document called a Loan Estimate. It’s a 3-page standardized form designed to help you understand the important details of your mortgage offer — and compare lenders with confidence. But let’s be honest: unless you're familiar with mortgage terms, it can feel overwhelming.

The first page shows you the loan amount, interest rate, monthly payments, and whether your loan includes prepayment penalties or balloon payments. The second page breaks down estimated closing costs, taxes, insurance, and other fees. Page three includes the Annual Percentage Rate (APR), which reflects the full cost of the loan, not just the interest rate.

By knowing what each section means, you’ll avoid surprises later. For example, seeing a low interest rate might be appealing, but if the loan has high closing costs or requires paying points upfront, the overall deal might not be as attractive. Understanding how to read a Loan Estimate puts you in the driver’s seat when it comes to making the best financial decision.