What is a Loan Estimate (LE)?

A Loan Estimate (LE) serves as an essential document in the mortgage process, providing borrowers with a clear summary of all the key terms and costs associated with a loan. This document outlines important details such as the loan amount, interest rate, monthly payment, estimated closing costs, and other fees. The purpose of the LE is to help borrowers understand the financial implications of the mortgage they are considering and to facilitate comparison shopping among different lenders.

In contrast, other options like the estimate of property value, formal loan approval notice, or a list of potential mortgage rates do not encapsulate the comprehensive nature of the LE. Property value estimates focus solely on how much a property is worth, while formal loan approvals indicate that a lender has officially approved a borrower's application, which occurs much later in the process. A list of potential mortgage rates lacks the detailed breakdown of costs that the LE provides. Hence, the Loan Estimate is specifically designed to summarize all terms and costs of the loan, making it a crucial tool for informed decision-making in the home financing process.