How to read and compare Loan Estimates in New York

What a Loan Estimate is, and when you get it

A Loan Estimate sets out the estimated interest rate, the monthly payment, the closing costs, the taxes and insurance, and how the rate and payment could change. The lender must give it to you within three business days of receiving your application, and every lender uses the same format (CFPB). It is not an approval: when it arrives, the lender hasn't yet approved or turned down your application.

Ask two or three lenders for one on the same loan amount, loan type and term.

Page 1: loan terms, projected payments and costs at closing

Loan Terms gives the loan amount, the interest rate and the monthly principal and interest, and answers two questions for each: can it increase after closing, and does the loan have a prepayment penalty or a balloon payment (12 CFR 1026.37(b)). For a purchase, the loan amount plus your down payment should equal the price; if it doesn't, ask why (CFPB explainer).

Projected Payments shows what you'd pay each month, in up to four columns if the payment changes over time, adding mortgage insurance and any escrow for taxes and insurance to principal and interest (1026.37(c)). Your real monthly cost is that total, not the principal and interest alone.

Costs at Closing gives the estimated closing costs and the cash to close. At the top of the page, the form also says whether your rate is locked and until when, and the date and time the closing cost estimates expire (1026.37(a)(13)).

Page 2: the closing costs, section by section

Page 2 splits the closing costs into loan costs (sections A to D) and other costs (E to I), then totals them in J (1026.37(f) and (g)).

• A. Origination Charges. The lender's own upfront fees. Points are listed here as a percentage and a dollar amount, on the line "% of Loan Amount (Points)". Compare the section's total, not each line (CFPB explainer).
• B. Services You Cannot Shop For. Services the lender requires and chooses the provider for.
• C. Services You Can Shop For. Services the lender requires but lets you choose the provider for. Shopping can save money; check with the lender before using a provider who isn't on its list.
• D. The total of A, B and C: the costs that depend on which lender you pick.
• E. Taxes and Other Government Fees. Two lines: "Recording Fees and Other Taxes", and "Transfer Taxes" that you pay.
• F. Prepaids. Amounts paid ahead, such as the first year's homeowner's insurance and the interest from closing until your first payment.
• G. Initial Escrow Payment at Closing. What goes into the escrow account for future tax and insurance bills.
• H. Other. Anything else you're likely to pay at closing; an owner's title insurance policy appears here.
• J. Total Closing Costs. D plus I, less any lender credits, which are shown as a negative number.

Sections E to H mostly come from your purchase, not the lender: the lender doesn't set your property taxes or your insurance (CFPB explainer). That is why our comparer counts A, B and C.

Where New York's taxes appear

The federal rule sorts government charges by how they are worked out, not by their name. A tax based on the loan amount or the sale price is a transfer tax on the form; a fee for recording documents, priced by document or page, is a recording fee. Only transfer taxes you pay appear on your Loan Estimate (CFPB official interpretation of 1026.37(g)(1)).

New York's mortgage recording tax is charged on the loan amount (NYS DTF memo TSB-M-05(4)R), and the mansion tax, which the buyer pays at $1 million and above, on the price (NYS DTF). On the federal definition, both belong on the "Transfer Taxes" line of section E. The seller's New York State and City transfer taxes appear only if you pay them, as buyers of new developments often do. A co-op loan has no mortgage recording tax: the Department of Finance says loans on individual co-op apartments don't incur it (NYC DOF). If the figure looks wrong, check it against our closing-cost calculator and ask the lender how they worked it out.

Page 3: comparisons and other considerations

The Comparisons box gives three figures (1026.37(l)):

• In 5 Years: the principal, interest, mortgage insurance and loan costs you'll have paid by the end of the 60th month, and how much of the principal you'll have paid off.
• Annual Percentage Rate (APR): your costs over the loan term expressed as a rate. It is not your interest rate.
• Total Interest Percentage (TIP): the interest over the whole term as a percentage of the loan amount.

They assume a time frame that may not be yours. The APR and TIP spread costs over the full term, and you may sell or refinance long before then.

Points or lender credits: a worked example

One point is 1% of the loan amount, paid at closing for a lower rate. Lender credits work the other way: a higher rate in exchange for money towards your closing costs (CFPB). Which is cheaper depends on how long you keep the loan, so the CFPB suggests comparing offers over a short, a long and your most likely holding period.

Take three made-up offers on the same $1,200,000, 30-year fixed loan, each with $2,450 in section B and $3,400 in section C:

• Offer 1 (1 point): 6.125%, with $12,000 in points, so $13,495 in section A. Monthly principal and interest $7,291.
• Offer 2 (no points): 6.5%, $1,495 in section A. Monthly $7,585.
• Offer 3 (lender credit): 6.875%, $1,495 in section A and a $6,000 lender credit. Monthly $7,883.

Counting interest plus the upfront charges (principal you repay stays yours, so it isn't a cost):

Kept for a year, Offer 3 (lender credit) costs least. Kept for ten, Offer 1 (1 point) does, by $32,971. The no-points offer overtakes the lender credit after 16 months (1 year 4 months), and the points offer overtakes the no-points one after 32 months (2 years 8 months). So in this example the point pays for itself only if you keep the loan longer than that. Open this example in the comparer and change the years.

Rate locks and expiry dates

A rate lock means your interest rate won't change between the offer and closing. Locks usually last 30, 45 or 60 days. Some lenders lock when they issue the Loan Estimate and some don't; page 1 says which. Make sure the lock runs until your closing, and ask what an extension would cost, since that isn't on the form. A locked rate can still change if your application changes, for example the loan amount, your credit score or the income the lender can verify (CFPB).

The closing cost estimates have their own expiry, also on page 1. If you don't tell the lender you intend to proceed within 10 business days of receiving the Loan Estimate (or a longer period the lender sets), it can issue revised estimates (official interpretation of 1026.37(a)(13)).

What can change at the Closing Disclosure

At least three business days before closing, the lender must give you a Closing Disclosure with the final terms and costs, so you can compare them with your Loan Estimate (CFPB). Check the loan amount, the rate (a locked rate can change only in limited circumstances) and any services that weren't on the estimate (CFPB).

Some costs are capped (CFPB):

• Can't increase: fees paid to the lender, mortgage broker or their affiliates for a required service; fees for required services you couldn't shop for from an unaffiliated provider; and transfer taxes.
• Can increase by up to 10% in total: recording fees, and required services from a provider on the lender's written list.
• Can increase by any amount: prepaid interest, insurance premiums, the initial escrow deposit, services you shopped for from a provider who isn't on the list, and services the lender doesn't require.

The caps don't apply after a genuine change in circumstances, such as a different loan type or down payment, an appraisal above or below the expected value, a change in your credit, or income the lender couldn't document. If costs rise above the limits without one, you're entitled to a refund of the excess.

How to compare your offers

1. Ask each lender for the same loan amount, type, term and lock period, ideally on the same day.
2. Check page 1 matches what you discussed, and note each lock's expiry.
3. Add sections A, B and C for each offer, and note the points in A and any lender credit in J.
4. Pick how long you expect to keep the loan, then compare interest plus those charges over that period. The Loan Estimate comparer does this, and shows when paying more upfront pays back.
5. Check section E against our closing-cost calculator, then ask the lender you prefer whether it will match a better offer on any line.