Key Terms In The Mortgage Loan Estimate

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.

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