How to read a Loan Estimate in New Hampshire, page by page

What is a Loan Estimate, and when do I get one?

A Loan EstimateLoan Estimate A standard three-page form you receive within three business days of applying that shows your estimated rate, payment and costs. See the full glossary× shows the loan terms, the estimated monthly payment and the estimated closing costs for a specific mortgage offer. Federal rules require the lender to deliver or mail it within three business days after it receives your application.

An application, for this purpose, is six pieces of information: your name, your income, your Social Security number so the lender can check your credit, the property address, an estimate of the property's value and the loan amount you want. Until you receive a Loan Estimate and say you want to go ahead, the only fee a lender can generally charge is a modest credit report fee.

What's on page 1?

• The top box shows the date issued, the loan term, purpose and product, the loan type (conventional, FHA, VA or other), and whether the interest rate is locked and until when. If it isn't locked, the rate and the costs tied to it can change.
• Loan Terms shows the loan amount, interest rate and monthly principal and interest, and whether any of them can increase after closing. It also says whether the loan has a prepayment penalty or a balloon payment.
• Projected Payments adds mortgage insuranceMortgage insurance (PMI or MIP) Insurance that protects the lender on many loans with a smaller down payment. It's added to your payment and can often be removed later. See the full glossary× and estimated escrow for property taxes and homeowners insurance to show the full estimated monthly payment. In New Hampshire, the tax part varies a lot by town.
• Costs at Closing shows the estimated closing costs and the estimated cash to closeCash to close The total you bring to closing: your down payment plus closing costs, minus any deposits, credits or gifts. See the full glossary×.

Page 2: what's in each closing cost section?

Page 2 lists every estimated closing cost in lettered sections:

• A. Origination Charges: what the lender (and a broker, if one is involved) charges to make the loan, including any points paid to lower the rate.
• B. Services You Cannot Shop For: third-party services the lender chooses, such as the appraisal and credit report.
• C. Services You Can Shop For: services such as title work, where you may pick your own provider.
• E. Taxes and Other Government Fees: recording fees and transfer taxes.
• F. Prepaids: homeowners insurance, prepaid interest and any property taxes due at closing.
• G. Initial Escrow Payment at Closing: the cushion that starts your escrow accountEscrow account An account your loan servicer uses to collect and pay your property taxes and homeowners insurance as part of your monthly payment. See the full glossary×.
• H. Other: items such as an owner's title policy or condo association fees.

Lender credits, if any, reduce the total. The NH closing costs guide explains each cost in more detail, and the escrow guide covers sections F and G.

Which costs can I shop for?

Section C is the one to look at. The lender gives you a written list of providers for those services, and you can choose one from the list or find your own. Title and settlement services are the most common examples.

Sections A and B are set by the lender's own choices, so they're the parts that differ most from one offer to the next. Section E is set by government fees and the state's transfer tax, so it should look about the same on every offer for the same property.

Where does the NH transfer tax show up?

New Hampshire's real estate transfer taxReal estate transfer tax A New Hampshire tax on property sales, $0.75 per $100 of the price for both the buyer and the seller. See the full glossary× appears in Section E, under transfer taxes, next to the county registry's recording fees. In New Hampshire the transfer tax is generally split between the buyer and the seller, so your Loan Estimate shows the buyer's share. On a refinance there's usually no transfer tax, only recording fees.

The NH transfer tax calculator shows the buyer's and seller's shares for any price.

Page 3: which comparisons matter?

• In 5 Years shows the total you'd pay in the first five years, including principal, interest, mortgage insurance and loan costs, and how much principal you'd pay off. It's a quick way to compare offers if you expect to sell or refinance within a few years.
• Annual Percentage Rate (APR) expresses the loan's costs over the full term as a yearly rate. It's useful for comparing loans of the same type and term.
• Total Interest Percentage (TIP) is the total interest over the life of the loan as a share of the loan amount.

Page 3 also lists other considerations, such as whether the loan can be assumed by a future buyer and whether the lender plans to service the loan or transfer it.

Which costs can change before closing?

Federal rules limit how much the estimate can change, in three groups:

• Can't increase: the lender's and broker's own charges, services you can't shop for, and transfer taxes.
• Can increase by up to 10% in total: recording fees, plus services you can shop for when you choose a provider from the lender's list.
• Can change: prepaid interest, homeowners insurance, escrow amounts, and services you shop for on your own.

The lender can issue a revised Loan Estimate for specific reasons, such as when you lock your rate, when you ask for a change, or when new information changes the loan, like a lower appraisal.

How do I compare two Loan Estimates?

1. Line them up on the same terms: the same loan type, loan amount and term, and check whether each rate is locked and on what date each was issued.
2. Compare Section A and any points or lender credits. One offer may have a lower rate with more points, another a higher rate with credits.
3. Check Section B for differences in third-party fees.
4. Use page 3: the In 5 Years figures and the APR, for loans of the same type and term.
5. Ask about anything unclear. A loan officer should be able to explain every line.

The CFPB recommends asking for more than one Loan Estimate before you choose. Tom offers a free second look at a Loan Estimate you already have.

What happens next: the Closing Disclosure

At least three business days before closing, you'll get a Closing Disclosure with the final terms and costs. Put it next to your latest Loan Estimate and compare the loan terms, the projected payments and the closing costs. If the APR changes beyond a small tolerance, the loan product changes or a prepayment penalty is added, a new three-day waiting period starts.

The after you apply guide walks through the rest of the process to closing.