Loan Estimate
A Loan Estimate is a standardized three-page disclosure form that lenders must provide within three business days of receiving a mortgage application. Required by the TRID rule, it details the estimated interest rate, monthly payment, closing costs, and key loan terms in a format designed for comparison across lenders.
What This Means
TRID Requirement and Timing
The Loan Estimate replaced the earlier Good Faith Estimate (GFE) and initial Truth in Lending (TIL) disclosure under the TILA-RESPA Integrated Disclosure (TRID) rule, effective October 3, 2015 . Lenders must issue the Loan Estimate within three business days of receiving six key application elements: borrower name, income, Social Security number, property address, estimated property value, and loan amount sought . The borrower must receive the form at least seven business days before closing .
What the Loan Estimate Contains
The form is divided into three pages with standardized sections:
- Page 1: Loan terms (amount, rate, monthly principal and interest), projected payments including taxes, insurance, and mortgage insurance
- Page 2: Itemized closing costs broken into loan costs (origination charges, services borrower cannot and can shop for) and other costs (taxes, prepaids, initial escrow)
- Page 3: Comparisons (total cost over 5 years, APR, total interest percentage) and contact information
Tolerance Rules and Changes
TRID imposes tolerance limits on how much final closing costs can exceed the estimates. Certain charges have zero tolerance (they cannot increase), including lender origination fees and transfer taxes. Other charges have a 10% cumulative tolerance for services the borrower did not shop for. Charges with no tolerance limit include items the borrower shopped for independently and prepaid interest. If a changed circumstance occurs (such as a rate lock or appraisal result), the lender may issue a revised Loan Estimate reflecting updated figures.