How to compare mortgage loan estimates
Two lenders, two three-page forms, and no obvious winner. This walkthrough goes down the Loan Estimate line by line and shows which figures decide the comparison — then hands the arithmetic to the comparison tool.
Seven steps, in order
- 01
Line up the same page on every offer
The Loan Estimate is a standardized three-page form, so page 1 of one lender's estimate holds the same figures in the same order as page 1 of another. Put your estimates side by side and read across, not down. If one is a Loan Estimate and the other is an unofficial worksheet or rate sheet, they are not comparable — ask for the real form before you decide anything.
- 02
Check that the loans are actually the same shape
Before comparing a single dollar, confirm the loan amount, the term in years, whether the rate is fixed or adjustable, the loan type, and the lien position all match. A 30-year fixed at one lender and a 5/1 adjustable at another will always look cheaper on the adjustable side — that is the product talking, not the lender.
- 03
Read the interest rate and the APR together
The rate sets your monthly principal and interest. The APR folds the lender's own costs — origination, discount points, certain prepaid items — into one annualized number. A wide gap between rate and APR is the tell that a low headline rate was bought with heavy upfront cost. A low rate with an APR close behind it is usually the cleaner offer.
- 04
Separate what you pay once from what you pay monthly
Total closing costs, the cash needed to close, and any discount points are one-time. Principal and interest, mortgage insurance, and escrowed taxes and insurance repeat every month. Two offers can carry an identical payment and differ by thousands at the closing table, so never judge on payment alone.
- 05
Price the points and the credits
Discount points buy the rate down: you pay more now to pay less each month. A lender credit is the same trade in reverse — the lender covers part of your closing costs in exchange for a higher rate. Neither is good or bad on its own. Both are only worth judging against how long you will actually hold the loan.
- 06
Work out the break-even
Take the extra upfront cost of the more expensive offer and divide it by the monthly saving it buys. The answer is the number of months before that offer starts paying you back. If break-even falls past the point you expect to sell, refinance or pay off, the cheaper-up-front offer wins even though its rate reads worse.
- 07
Decide which measure matters for your situation
Short hold or tight cash: weight upfront cost heavily. Long hold in a home you intend to keep: weight APR and lifetime interest. Stretched budget: weight the monthly payment. Comparison only has a right answer once you have said which of these you are optimizing for.
Things that quietly break a comparison
- Different rate-lock periods
- A rate quoted with a 15-day lock and one quoted with a 45-day lock are not the same offer. Longer locks cost more, and a short lock you cannot actually close inside is worth nothing.
- Estimates dated days apart
- Mortgage rates move. Two estimates issued a week apart may differ mostly because the market moved, not because one lender is better. Ask for fresh figures on the same day when you are close to deciding.
- Escrow and prepaid differences
- Prepaid interest and escrow deposits depend on your closing date and your local tax calendar. They are real money but they are not a lender's pricing — do not let them decide the comparison.
- Comparing a purchase to a refinance
- Costs and purpose differ enough that side-by-side numbers mislead. Compare purchases to purchases and refinances to refinances, and keep lien positions matched.
Now run your own numbers
Key in the figures from each estimate and the analyzer ranks them on APR, upfront cost, monthly payment and break-even, weighted the way you choose. Everything runs in your browser on the numbers you enter.