Loan Estimate: what to review before you commit

Start with the structure, not just the rate

The interest rate matters, but it does not tell the whole story. A lower rate can come with points. A higher rate can come with lender credits. A monthly payment can look manageable while cash to close is doing something very different.

The useful question is not only “is this rate good?” It is “what am I paying for this structure, and does it match my plan?”

The numbers to review together

• Monthly payment, including principal, interest, taxes, insurance, mortgage insurance, and HOA if applicable.
• Cash to close, including down payment, closing costs, prepaid items, and escrow reserves.
• Points or lender credits, because those change how the rate and upfront cost relate to each other.
• Loan amount and loan type, especially if the estimate moves between conventional, FHA, jumbo, or another structure.
• Escrow setup, because taxes and insurance collected at closing can make the cash-to-close number move.

Where surprises usually hide

Most confusion comes from items that are real but easy to misread:

• Prepaids are not lender profit. They are usually interest, insurance, and tax-related timing items.
• Escrow reserves are money held to pay future tax and insurance bills, not a fee in the same way an origination charge is.
• Discount points are optional in many structures, but they must be understood as money paid now for a different rate/payment trade-off.
• Mortgage insurance can change the monthly payment enough that the down payment conversation needs to be reviewed again.

Questions to ask before you move forward

• What part of this estimate is fixed, and what could still change before closing?
• Am I paying points, receiving credits, or neither?
• Which line items are lender-controlled and which are third-party or government charges?
• Does the cash-to-close number include enough room for reserves after closing?
• If I keep the home or loan for a shorter period, does this structure still make sense?

When a second opinion is useful

A second opinion is useful when the document is technically complete but still hard to interpret. Bring the Loan Estimate to a call and review the whole structure: payment, cash to close, points, credits, mortgage insurance, escrow, and the next questions to ask before committing.