LE Walkthrough
How to Read a Loan Estimate - Section by Section
The Loan Estimate is a 3-page standardized form. Each section serves a different purpose - some are negotiable, some are tolerance-regulated, some are pure third-party pass-throughs. Here is what to look at first.
Page 2 - The Comparison Page
Section A: Origination Charges
Lender-controlled fees: origination, processing, underwriting, doc prep, admin
Tip: THIS is where you compare lenders. Watch for stacked "junk fees" like Administration Fee or Doc Prep Fee inflating Section A.
Section B: Services You Cannot Shop For
Appraisal, credit report, flood determination, tax service, lender-mandated inspections
Tip: Lender picks the vendor. Pricing within tolerance - typically minor variance.
Section C: Services You Can Shop For
Title insurance, settlement/closing, survey, pest inspection
Tip: You can shop these to lower closing costs. Title savings can be $500-$2,000 in many states.
Section D: Total Loan Costs
A + B + C combined
Tip: High-level comparison line. But you must look INSIDE A to compare apples-to-apples.
Section E: Taxes & Government Fees
Recording, transfer taxes, transfer stamps
Tip: Set by state/county. Not lender-controlled. Same across all lenders for the same property.
Section F: Prepaids
Prepaid interest, hazard insurance premium, property tax
Tip: Reflects your loan/property, not lender markup. Generally not negotiable.
Section G: Initial Escrow Deposits
Reserves for property tax and insurance
Tip: Set by lender escrow requirements + closing date. Standard across lenders.
Section H: Other
Owner's title policy (optional), real estate broker commission, etc.
Tip: Optional items. Owner's title in particular varies by state custom.
Conventional Loan Facts
- Down payment as low as 3% for first-time homebuyers, 5% for others
- Down payment assistance programs available to fully cover the 3% down payment
- Private Mortgage Insurance (PMI) required below 80% LTV - automatically removed at 78%
- Maximum DTI typically 45%, up to 50% with strong compensating factors
- Minimum credit score generally 620; best rates at 740+
- Available for primary residence, second home, or investment property
- No upfront mortgage insurance premium - only monthly PMI if applicable
Frequently Asked Questions
Which sections actually matter when comparing two Loan Estimates?+
Section A (Origination Charges) is the only fully lender-controlled section. Sections B and C have some variance but most third-party costs are similar. Compare Sections A first, then rate, then any MI on Page 1.
What is a "junk fee" on a Loan Estimate?+
A lender-controlled charge that does not correspond to actual cost - inflated admin, processing, doc prep, or underwriting fees designed to pad lender comp. These show up in Section A. Rate Direct charges a flat 1% origination, disclosed up front rather than padded across several line items.
Can I negotiate the Loan Estimate?+
Yes - on Section A (lender fees) and Section C (services you shop). The rate itself is market-driven, but you can ask the lender to credit lender fees or buy down the rate with points.
What is the "cash to close" line?+
On Page 1, near the bottom: your total out-of-pocket at closing. Down payment + total closing costs - earnest money already paid - lender credits.
How do I spot a "no closing cost" loan in the LE?+
Look for "Lender Credit" in Section J on Page 2 - it offsets some or all of the closing costs. A true no-cost loan zeroes out the cash-to-close beyond down payment. The trade-off is a slightly higher rate.
LE explained (overview)
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Zero out-of-pocket origination