Post-Purchase Loan Estimate Comparison Guide: Line by Line
Justin Reynolds
Key Takeaways
- Compare loan estimates line by line for an apples-to-apples assessment
- Ensure loan amount, term, purpose, and rate lock status match between estimates
- Look out for discrepancies that can make one estimate appear cheaper than it is
If you've received two or more loan estimates from different lenders, you might be wondering how to compare them effectively. This guide will walk you through a line-by-line comparison, helping you make an apples-to-apples assessment of your options.
Apples-to-Apples Check
Before diving into the details, ensure that the estimates match in the following key areas:
- Loan Amount
- Loan Term
- Loan Purpose
- Rate Lock Status
Compare Page 1: Big-Picture Costs
Page 1 of the Loan Estimate provides an overview of the loan, including:
- Interest Rate: The annual interest rate for the loan.
- Projected Payments: Monthly payments, including principal and interest.
- Cash to Close: Upfront costs, such as closing fees and down payment.
- Points: Additional fees equal to a percentage of the loan amount.
Compare Page 2: Sections A to J
Page 2 details specific costs associated with the loan, broken down into sections:
- Section A: Origination Charges
- Section B: Services You Cannot Shop For
- Section C: Services You Can Shop For
- Section D: TOTAL Loan Costs
- Section E: Taxes and Other Government Fees
- Section F: Prepaids
- Section G: Initial Escrow Payment at Closing
- Section H: Other
- Section I: TOTAL Other Costs
- Section J: TOTAL Closing Costs (includes lender credits)
Compare Page 3: Comparisons
Page 3 summarizes the loan terms and costs in a table format, making it easy to compare multiple estimates.
Compare Your Loan Estimates Side by Side
Transcribe the same line from up to 3 real Loan Estimates into each column. The lowest cost and lowest APR cell in each row is highlighted automatically once 2 or more lenders are filled in.
| Line item | Lender A | Lender B | Lender C |
|---|---|---|---|
| Rate Lock (days / status) | |||
| Points | |||
| Section A Fees ($) | |||
| Net Closing Costs ($) | |||
| APR (%) | |||
| TIP — Total Interest Percentage (%) | |||
| Principal Paid After 5 Years ($) |
Negotiation questions to ask each lender
- Why does one loan estimate have a different rate lock status?
- How do prepaid taxes and insurance estimates vary between lenders?
- Are there any lender credits that could be masking a higher rate?
- Are points being offered to lower the rate, but raising upfront cash costs?
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Questions to Ask a Lender
Before making a decision, it's essential to ask your lenders questions. Here are some key points to clarify: Why does one loan estimate have a different rate lock status? How do prepaid taxes and insurance estimates vary between lenders? Are there any lender credits that could be masking higher rates? Are points being offered to lower the rate, but raising upfront cash costs?
What Makes One Loan Estimate Look Cheaper Than It Really Is
When comparing loan estimates, be aware of the following potential discrepancies:
- Mismatched Lock Status: A lender may advertise a lower rate with different lock terms.
- Prepaid Taxes and Insurance Estimates: Differences in estimated taxes and insurance can significantly impact the final cost of the loan.
- Lender Credits Masking Higher Rates: Lenders may offer credits to offset higher interest rates, making it appear that the loan is cheaper than it actually is.
- Points Lowering Rate While Raising Upfront Cash: Points can lower your rate but increase upfront costs.
FAQs
How can I compare loan estimates as per CFPB guidelines?
Comparing the rate, APR, closing costs, and TIP is a good start. However, it's crucial to look at identical loan scenarios before making a decision.
Is a lower APR always better than a lower rate?
Generally, a lower APR means you pay less in interest over the life of your loan. But consider upfront costs, closing costs, and other factors as well.
When are points worth it?
Points can help you secure a lower interest rate but require additional upfront cash. Weigh the long-term savings against the immediate costs.
Why do escrow estimates differ between lenders?
Escrow estimates cover taxes and insurance payments over the life of your loan. Different lenders may have different methods for calculating these costs.
How do lender credits affect my decision?
Lender credits can seem attractive, but they might be covering higher rates or fees elsewhere in the loan estimate. Make sure to compare apples-to-apples.
Legal/Compliance Caveat
The examples provided in this guide are educational in nature and do not represent any specific lender or loan scenario. Your options may vary, and it is essential to compare identical loan scenarios before deciding.
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