What is the purpose of a loan estimate document?

The purpose of a loan estimate document is to summarize the terms of a loan and estimated costs associated with it. This document is crucial for transparency in the lending process because it provides borrowers with a clear understanding of the loan amount, interest rate, monthly payments, and total costs involved, including any closing costs.

A loan estimate is typically provided within three business days of a lender receiving a loan application. It allows borrowers to compare different loan offers from various lenders, ensuring that they can make informed decisions based on the projected costs and terms of the loan. This upfront clarity helps prevent any surprises later in the lending process.

While other options may describe important aspects of the mortgage process or the information associated with obtaining a loan, they do not accurately reflect the primary function of a loan estimate, which is focused specifically on summarizing the loan's financial details for prospective borrowers.