How to compare Loan Estimates without getting distracted by one number

Make sure you are comparing the same loan

Start with the basics at the top of page one. Loan amount, term, purpose, product and rate type should match the scenario you requested. If one estimate uses a different down payment or loan amount, the rest of the comparison can mislead you.

Check whether the rate is locked. If it is, compare the lock expiration and any lock cost. If it is not, remember that pricing can change before the loan is locked.

A clean comparison holds the home, loan amount, term and timing steady.

Read the projected payment in layers

Principal and interest are the loan layer. Mortgage insurance is the program layer. Estimated escrow adds property taxes and homeowners insurance. Association dues may not appear in the payment total even though they affect affordability.

Look beyond the first payment. Adjustable rate structures can change later. Mortgage insurance may also change or end depending on the loan and applicable rules.

• Principal and interest
• Mortgage insurance
• Estimated property taxes
• Homeowners insurance
• Association dues paid separately

Separate lender costs from the rest

Origination charges and lender credits are useful comparison points because the lender controls them. Services you cannot shop for also deserve review. Taxes, recording charges and prepaid items can vary for reasons unrelated to lender pricing.

Discount points should be tested against the rate reduction they purchase. A lender credit should be tested against any increase in rate or payment.

Reconcile cash to close

Cash to close combines down payment, closing costs and prepaid expenses, then subtracts deposits, credits and other adjustments. A difference between estimates may come from different tax, insurance or escrow assumptions rather than a true price advantage.

Ask the Loan Officer to explain large differences and update estimates when the property, contract or credits change.

Choose using the time you expect to keep the loan

The comparison section shows costs over five years, but your own holding period may be shorter or longer. Consider how long you expect to keep the home or loan and whether preserving cash now matters more than reducing the monthly payment.

There is no universal winner. There is a transaction whose costs and flexibility fit the buyer's plan better.