Loan Estimate: How do I compare 2 or more mortgage offers?


At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict , this post may contain references to products from our partners. Here’s an explanation for

The Loan Estimate was designed to make it easy for borrowers to compare loan offers. The document contains a shortcut to make comparisons especially simple: the 5-year cost.

On Page 3, the top item in the “Comparisons” section details:

  • The total mortgage-related payments you will make in the first 5 years — closing costs plus the total principal, interest and mortgage insurance you will pay in the first 60 months.
  • How much principal you will have paid off in the first 5 years. Unless the home’s value falls, this is the amount of equity you will accumulate in those 5 years.

Page 3 of Loan Estimate form

These 2 numbers — total loan costs and equity accumulated in 5 years — are useful in comparing mortgage offers. The Consumer Financial Protection Bureau intended for borrowers to focus on those numbers.

The Loan Estimate was refined through several rounds of focus-group testing. From the start, participants identified “the loan that showed more principal paid off in 5 years as 1 of their choice factors,” according to the focus-group report.

Besides the “in 5 years” numbers, 2 other figures appear in the “Comparisons” section on Page 3:

  • The annual percentage rate, or APR, is a calculation that results from adding closing costs to the total interest paid over the life of the loan.
  • The total interest percentage, or TIP, represents the total interest paid over the life of the loan as a percentage of the loan amount. For example, if you borrowed $100,000 and then paid $82,000 interest over the next 30 years, the TIP would be 82%.

Is your credit mortgage-ready? Get your free credit score at myBankrate.

Loan Estimate Guide