How to Compare Loan Estimates From Three Lenders

Shopping for a mortgage can save thousands of dollars, but only if you compare the right numbers. The standardized Loan Estimate makes that possible: every lender must use the same three-page form, so you can line them up and see differences clearly.

Step 1: request comparable quotes

Give each lender identical information: purchase price, down payment, loan type, term and estimated credit score. Ask for the same lock period. Lenders must deliver a Loan Estimate within three business days after you provide six pieces of information: your name, income, Social Security number, property address, estimated value and loan amount. Rates change daily, so collect estimates on the same day if possible.

Step 2: compare page 1

• Loan amount should match across lenders.
• Interest rate and whether it's locked.
• Monthly principal and interest.
• Prepayment penalty or balloon payment: both should usually say "NO."
• Estimated cash to close.

Step 3: focus on Section A and lender credits

Section A, origination charges, is the cleanest comparison because it's entirely the lender's own pricing: application, underwriting, origination fees and discount points. Lender credits, shown in Section J, reduce your costs. Together they show how much each lender charges for the rate offered.

Step 4: be careful with sections B, C and F–H

Third-party services, taxes, prepaid interest and escrow deposits vary based on each lender's assumptions, not their actual pricing. One lender might estimate a lower insurance premium or fewer days of prepaid interest, making its total look cheaper without actually being cheaper. Treat these as roughly equal across lenders unless there's a large unexplained difference.

Step 5: use page 3 comparisons

• In 5 Years: total paid in principal, interest, mortgage insurance and loan costs over the first five years, and how much principal you'll have paid off.
• APR: useful for comparing same-type loans over the full term. See APR vs. interest rate.
• Total Interest Percentage (TIP).

A side-by-side example

	Lender 1	Lender 2	Lender 3
Rate	6.500%	6.625%	6.375%
Section A (incl. points)	$1,450	$1,195	$4,500
Lender credits	$0	$1,000	$0
Net lender cost	$1,450	$195	$4,500
Monthly P&I on $300,000	$1,896	$1,921	$1,872

Lender 3 has the lowest rate but charges about $3,050 more upfront than Lender 1 to save $24 a month, a break-even of over ten years. Lender 2 is cheapest upfront but costs $25 more per month than Lender 1, a break-even of about four years. For a buyer planning to stay five to seven years, Lender 1 is a balanced choice. For someone likely to refinance soon, Lender 2 may be best.

Step 6: negotiate

Share a competing Loan Estimate with your preferred lender and ask whether they can match the rate or fees. Many will. Also ask about lender credits in exchange for a slightly higher rate if you're short on cash.

Shopping won't wreck your credit

Credit scoring models treat multiple mortgage inquiries within a short window as one. Learn the details in do mortgage inquiries hurt your credit.

Red flags on a Loan Estimate

• Rate not locked when you thought it was. Check the "Rate Lock" line on page 1.
• A prepayment penalty or balloon payment marked "YES."
• Unusually low estimates for taxes, insurance or prepaid interest that make the cash to close look smaller than it will be.
• Unexpected loan type, such as an ARM when you asked for a fixed rate.
• Points you didn't ask for hidden in Section A.

If something doesn't match what you discussed, ask for a corrected estimate before you choose a lender.

Comparing lenders on service, too

Cost isn't the only factor. Ask each lender how long their recent purchase loans have taken to close, whether underwriting is done in-house, and who your point of contact will be. A lender that consistently closes on time can be worth a slightly higher cost when you have a contract deadline and earnest money at stake. Online reviews and your agent's experience with specific lenders can help you judge reliability.