Definition
A standard three-page form a mortgage lender must give you within three business days of your application, showing the loan's key terms and costs.
What it means
The Loan Estimate is a federal disclosure created by the CFPB. After you apply for most mortgages, the lender must send it within three business days. It shows the loan amount, interest rate, monthly payment, whether the rate can change, any prepayment penalty or balloon payment, estimated closing costs and cash needed to close. Because every lender uses the same form, it is designed for side-by-side comparison. Receiving a Loan Estimate does not mean you are approved or that you have to take the loan, and lenders may charge only a small credit report fee before you say you want to proceed. Some fees cannot increase at closing and others can rise only within limits, unless there is a valid change in circumstances.
Example
Two Loan Estimates for a $280,000 loan show 6.375% with $4,200 in lender charges and 6.5% with $1,100. Comparing page 2 and the five-year cost on page 3 shows which is cheaper for how long you expect to keep the loan.
Illustrative numbers only. Your situation will differ.