Loan Estimate vs. Closing Disclosure: How to Compare Them
By Mark Jost, NMLS #150914 · Published
When you buy a home with a mortgage, you get two key forms. One comes early. One comes right before closing. Learning how they work together can save you from surprises. Here is how I explain it to my buyers.
The Loan Estimate: your early look
After you apply, your lender must send you a Loan Estimate within three business days. It shows the loan terms the lender expects to offer, your estimated monthly payment, and your estimated closing costs. It is not a loan approval. It is a clear picture of what the loan may look like if you move forward.
Every lender uses the same form. That makes it easier to compare. If you want to shop around, ask each lender for a Loan Estimate for the same kind of loan.
The Closing Disclosure: your final look
Your lender must give you the Closing Disclosure at least three business days before your closing. It shows your final loan terms and your final costs. Use those three days. This is the time to ask questions and fix problems.
How to compare them
Put the two forms side by side. Check these things:
- Your name. Make sure it is spelled right. Even a small mistake can cause big trouble later.
- Loan term, purpose, product, and loan type. These should match what you expected. If they changed, call your lender right away and ask why.
- Loan amount. If it went up, ask why. Sometimes closing costs get rolled into the loan. That lowers what you pay at closing, but you pay more over time.
- Interest rate. If you locked your rate, your lender can only change it in limited cases. Ask if it looks different.
- Estimated total monthly payment. Make sure you are comfortable paying this amount every month.
- Closing costs. The services you could not shop for should be close to what you saw before. Look for any new service that was not on your Loan Estimate.
- Services you shopped for. If you see a company you do not know, ask your lender about it.
- Cash to close. This is the money you bring at closing. If it is different from your Loan Estimate, ask the lender to explain.
Features to watch for
Two features are riskier. A prepayment penalty means the lender can charge you a fee if you pay the loan off early. A balloon payment means the last payment is much bigger than your regular payments. Both forms show if your loan has them. If you see one and you did not expect it, ask about other options.
Taxes, insurance, and escrow
Look at whether your property taxes and homeowners insurance are paid through an escrow account as part of your monthly payment. Some items, like homeowners association dues, are often not included. If something is not in escrow, plan to pay it on your own.
Your seller credit
If the seller agreed to help with your closing costs, check that the credit on the Closing Disclosure matches what you agreed to in your contract.
What to do if something looks wrong
Do not wait until the closing table. Call your loan officer, point to the line, and ask why it changed. A good lender will walk you through it. Write down the answer so you can check it again.
If you are buying in Nashville, Franklin, Brentwood, or anywhere in Middle Tennessee, call me. I will go through both forms with you, line by line.
Sources
This article is general information, not a loan offer or legal advice. Every loan depends on credit, income, and property review. Mark Jost, NMLS #150914. Heathrow Mortgage, Company NMLS #1849599. Equal Housing Opportunity.