How to Compare Two Loan Estimates: Rate, APR, Closing Costs & Cash to Close

1. First, check whether the offers use similar assumptions

Find it: Page 1 · top of the form, Loan Terms, and Rate Lock.

Compare the loan amount, term, loan type, and product. A conventional loan and an FHA loan can have different insurance costs; a 15-year loan and a 30-year loan spread repayment differently. An adjustable rate introduces changes a fixed rate does not.

The forms do not have to be identical to be useful. Mark differences so you can separate lender pricing from differences in what you are borrowing. Ask for a second version using the same amount, term, and product when that would make the comparison clearer. Also check the issue dates, whether each rate is locked, and when any lock expires.

The CFPB Loan Estimate walkthrough shows where these details appear. The HomeBuyersPath tool is limited to fixed-rate offers.

2. Compare the interest rate, then look at its price

Find it: Page 1 · Loan Terms → Interest Rate.

The interest rate is the annual rate charged for borrowing the money. It does not include the loan's upfront fees. A lower rate may come with points or other higher upfront costs, so keep the payment and closing-cost figures beside it.

Timing matters, too. Market rates can change between the dates two estimates are prepared. A difference between an older unlocked quote and a newer locked quote may not be purely a difference in lender pricing. Ask what each lender can offer on comparable terms and timing. CFPB guidance on comparing offers.

3. Read APR separately from the interest rate

Find it: Page 3 · Comparisons → Annual Percentage Rate (APR).

APR expresses borrowing costs as a yearly rate under standardized disclosure rules. It reflects the interest rate and certain additional charges, such as points and applicable mortgage-broker or other loan fees. It is not the interest rate plus every closing expense, and it is not the rate used to calculate your monthly payment.

Use APR as another comparison measure alongside the loan term, cash needed now, monthly payment, and how long you may keep the loan. An APR comparison does not tell you whether the upfront cash fits your budget. Copy the disclosed APR instead of estimating it yourself. CFPB: interest rate versus APR.

4. Separate lender costs from other closing expenses

Find it: Page 2 · Loan Costs, Sections A–D; Lender Credits under Section J.

• Section A, Origination Charges: compare the subtotal, including points. Lenders may split their charges into different line items.
• Section B, Services You Cannot Shop For: compare the total for required services whose providers the lender selects. These are not all fees kept or set by the lender; government-program fees and insurance charges can also appear here.
• Section C, Services You Can Shop For: review the assumptions and available providers. A different estimate here may reflect a different service quote.
• Section D, Total Loan Costs: already includes A + B + C. Keep lender credits visible separately when comparing offers; they appear under Section J.

Do not add points to Section A again, or add Section A to Section D again. Property taxes, homeowners insurance, prepaids, and initial escrow are not simply the lender's price for your loan. Ask why those estimates differ. CFPB: which upfront costs to compare.

For those ownership-cost details, see prepaids versus escrow at closing.

5. Understand the points and lender-credit tradeoff

Find it: Page 2 · points in Section A; Lender Credits under Section J.

Discount points exchange an upfront charge for a lower rate than the same lender would otherwise offer on that loan. One point is 1% of the loan amount, but the rate reduction per point varies. Points do not prove an offer has the lowest rate across lenders.

Lender credits reduce upfront closing costs and may come with a higher rate. Some credits have other reasons, such as a temporary offer or compensation for a problem. Ask what explains yours. Whether a tradeoff fits depends on your cash, payment budget, and possible timeframes for keeping the loan. CFPB explanation of points and lender credits.

6. Compare both monthly-payment figures

Find it: Page 1 · Loan Terms and Projected Payments.

Monthly Principal & Interest covers repayment of the loan and interest. Estimated Total Monthly Payment also includes mortgage insurance and estimated escrow, when applicable. Compare the same initial payment period, then review any later periods shown.

Lower estimated taxes or insurance do not make a loan cheaper. Ask why the assumptions differ, and check Estimated Taxes, Insurance & Assessments for bills you must pay separately. Escrow and other housing costs can change even with a fixed interest rate.

The mortgage payment calculator helps you explore planning assumptions. When comparing actual offers, use each form's disclosed payments. CFPB payment and escrow explanations.

7. Compare Estimated Cash to Close

Find it: Page 1 · Costs at Closing; Page 2 · Calculating Cash to Close.

Cash to close is the estimated money still needed at closing, not closing costs alone. The calculation accounts for the down payment, closing costs, deposits already paid, credits, and applicable financing or other adjustments. Compare those assumptions before attributing the entire difference to fees.

Copy the reported total; do not deduct a deposit or lender credit a second time. For earlier planning, use the Cash Needed calculator. For the distinction between earlier payments and the amount still due, read earnest money, down payment, and cash to close.

8. Use the disclosed five-year borrowing cost

Find it: Page 3 · Comparisons → In 5 Years.

Copy the total paid and the principal paid off. The CFPB five-year comparison method subtracts the second figure from the first:

Five-year borrowing cost = disclosed total paid − disclosed principal paid off

Removing principal leaves the interest, mortgage insurance, and loan costs represented in those disclosed figures. This is not the full cost of owning a home: it does not include property taxes, homeowners insurance, or maintenance.

Do not substitute 60 times the total monthly payment, rebuild the figures from the rate, or add or subtract fees and credits again. The comparison uses what Page 3 discloses.

Five years is a comparison period, not a prediction that you will move or refinance then. If the scheduled loan term is under five years, these figures cover the shorter term; ask about the periods before comparing them. Regulation Z: In 5 Years disclosure and shorter-term interpretation.

Take these questions back to each lender

• Is my rate locked, when does it expire, and what could change before closing?
• Are points included, why are lender credits different, and can you show an alternative with fewer points or credits?
• Which fees are controlled by you, and which depend on a service provider or loan program?
• Why are the tax, insurance, mortgage-insurance, or escrow assumptions different?
• Can you explain the Estimated Cash to Close calculation, including deposits and credits already counted?

Write the answers beside the figures they explain. If the offers use different products or assumptions, ask for a comparable alternative before treating a numerical difference as a pricing difference.

Keep the wider homebuying plan in view

• Homebuyer Education Resource Center: follow money paid before and at closing, with a lesson and free handouts.
• First-time homebuyer guide: place loan shopping within the full buying process.