How to Compare Two Loan Estimates Line by Line

Before any cost comparison means anything, the two offers have to describe the same loan. Page one of the Loan Estimate lists the loan amount, the interest rate, whether the rate can change, whether there is a prepayment penalty or a balloon feature, and whether the payment can increase later. If any of those differ between the two documents, you are not comparing prices, you are comparing products.

This matters more on a cash-out refinance than people expect. A slightly different loan amount, because one lender rolled costs into the balance and the other did not, will shift almost every dollar figure further down the page and make one offer look cheaper for a reason that has nothing to do with pricing.

Also check the date and the rate-lock line. An estimate built on a different day, or one that is not locked while the other is, is a snapshot of a different moment in the market.

Section A, Origination Charges, is where the lender's own compensation lives: origination fees, underwriting or processing fees, application fees, and discount points paid to buy the rate down. This is money going to the lender, and it is the section where one offer can genuinely beat another.

Read points carefully. A lower rate paired with meaningful discount points is not the same offer as a slightly higher rate with no points, and Section A is where that trade shows up in dollars. Compare Section A against the rate on page one together, never separately, because a lender can move cost between the two almost at will.

If one estimate has a materially smaller Section A at a comparable rate and comparable loan amount, that is a real difference. It is the part of the page a lender cannot blame on a third party.

Section B covers services you cannot shop for, Section C covers services you can, and Section E covers recording fees and transfer taxes. These are third-party and government costs: appraisal, credit report, title work, settlement fees, county recording. The lender collects them and passes them along rather than keeping them.

This is where most apparent gaps between two estimates turn out to be noise. One lender may quote a title premium from an actual quote while another uses a conservative placeholder. One may estimate the appraisal high, the other low. Neither is lying, and neither difference will follow you to closing if the underlying vendor bill is the same.

Section C is the exception worth attention, because those are services you are allowed to shop. The estimate includes a written list of providers, and choosing your own is permitted. No lender can require a particular provider as a condition of the loan for services you have the right to shop.

Section F is prepaid items, mainly prepaid interest, homeowners insurance, and property taxes paid at closing. Section G is the initial escrow deposit that funds your impound account. Together they can be a large share of cash to close, and they routinely make one estimate look more expensive than another for no economic reason.

These are not lender charges. Your tax bill and insurance premium are what they are regardless of who writes the loan. The variation between two estimates usually comes from different assumptions about the closing date, because prepaid interest and escrow cushions are calendar-driven.

Treat Sections F and G as timing, not price. If you want an apples-to-apples read, mentally set them aside and compare what is left.

Page three carries the numbers most worth your time. The Annual Percentage Rate, stated as an APR, folds lender costs into the rate so two offers can be compared on one figure. Total Interest Percentage shows how much interest you pay over the life of the loan relative to the loan amount, which is where a lower rate with heavy upfront cost either earns itself back or does not.

The In 5 Years box is underused. It shows total cost and principal paid at that point, and for a homeowner who may refinance again or sell, it often separates two offers more honestly than the closing-cost total does.

One more place differences hide: the Lender Credits line inside Section J. A credit lowers today's cash but is purchased with a higher rate. That is a legitimate choice, not a discount, and it should be evaluated against how long you expect to keep the loan.