What is one of the purposes of the Loan Estimate?

The Loan Estimate is a vital document in the mortgage application process, designed to provide borrowers with clear and concise information about the terms and costs associated with a mortgage loan. Its primary purpose is to give prospective borrowers a detailed breakdown of the loan being offered, which includes the loan amount, interest rate, monthly payments, and various closing costs. This allows borrowers to compare different loan options effectively and understand their financial commitments.

While other elements mentioned in the choices have their own importance in the lending process—such as pre-approval, credit history, and mortgage insurance calculations—none serve as the fundamental objective of the Loan Estimate as clearly as outlining the specific terms and costs of a mortgage does. This clarity helps borrowers make informed decisions about their mortgage options, ensuring transparency in the lending process.