Homebuyers, shop around for the mortgage loan that works best for you. How? By comparing several lenders’ loan estimates.
Hesitant to apply with more than one lender? Credit Karma says:
If you’re looking for an auto loan or mortgage specifically, some credit score models will allow for some level of shopping around by essentially viewing multiple inquiries within a certain time period as just one. Bureaus usually identify the fact that you’re comparison shopping by noticing the types of credit lines you’re applying for and the size of your requested loan, so it may be best to stay consistent. The time period over which you can rate shop under these models without feeling the effect of multiple inquiries can vary and is often from around 14 days to up to 45.
What is a Loan Estimate?
A Loan Estimate is a three-page form that you receive after applying for a mortgage.
The Loan Estimate tells you important details about the loan you have requested.
The lender must provide you a Loan Estimate within three business days of receiving your application.
The form provides you with important information, including the estimated interest rate, monthly payment, and total closing costs for the loan. The Loan Estimate also gives you information about the estimated costs of taxes and insurance, and how the interest rate and payments may change in the future.
In addition, the form indicates if the loan has special features that you will want to be aware of, like penalties for paying off the loan early (a prepayment penalty) or increases to the mortgage loan balance even if payments are made on time (negative amortization). If your loan has a negative amortization feature, it appears in the description of the loan product.
The form uses clear language and design to help you better understand the terms of the mortgage loan you’ve applied for. All lenders are required to use the same standard Loan Estimate form. This makes it easier for you to compare mortgage loans so that you can choose the one that is right for you.
When you receive a Loan Estimate, the lender has not yet approved or denied your loan application. The Loan Estimate shows you what loan terms the lender expects to offer if you decide to move forward. If you decide to move forward, the lender will ask you for additional financial information.
For more info and To see a sample Loan Estimate form with interactive tips and definitions >> https://www.consumerfinance.gov/ask-cfpb/what-is-a-loan-estimate-en-1995/