Purchase Tips · March 29, 2025
How to Read Your Loan Estimate and Spot Hidden Costs
The Loan Estimate is the most important comparison document in mortgage shopping. Here is how to read it, compare lender quotes, and catch inflated fees.
The Loan Estimate is a standardized 3-page form every lender must issue within 3 business days of your application.
Page 1: The Summary
Shows loan amount, interest rate, monthly payment, and whether the rate is fixed or adjustable. Check: is the rate what you were quoted? Is the loan type correct? Note which fees can increase vs. which are fixed.
Page 2: Closing Cost Details
Section A covers lender fees (origination, underwriting) — vary widely between lenders. Section B covers third-party services you cannot shop for. Section C covers services you CAN shop for — title search, title insurance, settlement agent — compare quotes here and save hundreds.
Sections E-H are prepaids and escrow — homeowners insurance, prepaid interest, initial escrow deposits. These are not fees; they are advance payments for ongoing costs.
Comparing Quotes
Focus on: total loan costs in Section J, APR (includes rate plus fees), and monthly payment. Be wary of unusually low estimates — some lenders lowball and make up the difference on the Closing Disclosure received only 3 days before closing.
HMS issues accurate, honest Loan Estimates from day one. Call 309-222-8286.