Lenders provide a Loan Estimate form within 3 business days of application for an approved loan. This form documents the terms, projected payment, costs and other details. These definitions may be helpful in interpretation:
- Loan Amount: total dollars borrowed, which is not the same as total borrowing cost.
- Interest Rate: cost you will pay each year to borrow, converted to a percentage rate. Not quite the same thing as:
- APR (Annual Percentage Rate): this includes interest rate, points (if used), mortgage broker fees, and other charges you pay to get the loan.
- Monthly Principal & Interest: payment amounts that go to reducing loan principal, and to paying interest, each month. (Mortgage insurance and escrow payments are not included here.)
- Projected Payments: approximate payment amounts over the years, with the major components such as principal, interest, mortgage insurance, escrow and assessment broken out.
- Estimated Closing Costs: specific costs to close, detailed. These are directly loan-related costs.
- Estimated Cash to Close: sum of estimate, plus any other known costs, to provide the total cash needed at loan close.