Loan Estimate Explainer
Review the details of your 5 Year Interest Only, 5/3 Adjustable Rate Mortgage. This guide breaks down every section of your specific Loan Estimate from Ficus Bank.
Download Sample Loan Estimate (PDF)
Source: Consumer Financial Protection Bureau (CFPB) | consumerfinance.gov
PAGE 1 of 3
Applicants Michael Jones and Mary Stone
Property 456 Somewhere Avenue, Anytown, ST 12345
Sale Price $240,000
Date Issued 2/15/2013
Loan ID # 123456789
Rate Lock NO
Loan Terms
| Loan Amount | $211,000 |
|---|---|
| Interest Rate | 4% (Adjusts every 3 years starting in year 6) |
| Monthly Principal & Interest | $703.33 (Can go as high as $2,068 in year 15) |
| Prepayment Penalty | NO |
| Balloon Payment | NO |
Why this matters
Since this is an Adjustable Rate Mortgage (ARM), your rate is only fixed at 4% for the first 5 years. Pay attention to the "Can this amount increase?" column. In year 15, your rate could technically reach 12%.
Projected Payments
| Payment Calculation | Years 1-5 | Years 6-8 | Years 9-11 | Years 12-30 |
|---|---|---|---|---|
| Principal & Interest | $703.33 | $1,028 (min) $1,359 (max) |
$1,028 (min) $1,604 (max) |
$1,028 (min) $2,068 (max) |
| Mortgage Insurance | + 109 | + 109 | + 109 | + 0 |
| Estimated Escrow | + 0 | + 0 | + 0 | + 0 |
| Estimated Total Monthly Payment | $812 | $1,137 - $1,468 | $1,137 - $1,713 | $1,028 - $2,068 |
Costs at Closing
| Estimated Closing Costs | $8,791 |
|---|---|
| Estimated Cash to Close | $27,791 |
PAGE 2 of 3
Closing Cost Details
This section itemizes exactly where that $8,791 figure comes from.
A. Origination Charges (Paid to Ficus Bank)
| 1% of Loan Amount (Points) | $2,110 |
|---|---|
| Application Fee | $500 |
| Processing Fee | $500 |
| Total Origination Charges | $3,110 |
Action Item
Check the Points. You are paying $2,110 (1% of the loan) upfront to lower your interest rate. Ask yourself if you plan to keep the loan long enough to recover this cost.
B. Services You Cannot Shop For
| Appraisal Fee | $305 |
|---|---|
| Credit Report Fee | $30 |
| Flood Determination Fee | $35 |
| Lender's Attorney Fee | $400 |
| Tax Status Research Fee | $50 |
| Total | $820 |
C. Services You Can Shop For
| Pest Inspection Fee | $125 |
|---|---|
| Survey Fee | $150 |
| Title - Courier Fee | $32 |
| Title - Lender's Title Policy | $665 |
| Title - Settlement Agent Fee | $325 |
| Title - Title Search | $624 |
| Total | $1,921 |
How to Save Money
You can shop around for the services in Section C. We can provide a list of providers, but you are free to find cheaper options for the survey, pest inspection, and title services.
Other Costs (Taxes, Prepaids, Escrow)
| E. Taxes & Govt Fees (Recording) | $152 |
|---|---|
| F. Prepaids (Homeowner's Ins. Premium) | $1,000 |
| F. Prepaids (Prepaid Interest) | $352 |
| G. Initial Escrow Payment | $0 |
| H. Other (Owner's Title Policy) | $1,436 |
| Total Other Costs | $2,940 |
D. TOTAL LOAN COSTS (A+B+C)
$5,851
I. TOTAL OTHER COSTS (E+F+G+H)
$2,940
J. TOTAL CLOSING COSTS
$8,791
Calculating Cash to Close
| Total Closing Costs (J) | $8,791 |
|---|---|
| Closing Costs Financed | $0 |
| Down Payment/Funds from Borrower | $29,000 |
| Deposit | - $10,000 |
| Funds for Borrower | $0 |
| Seller Credits | $0 |
| Adjustments and Other Credits | $0 |
| Estimated Cash to Close | $27,791 |
PAGE 3 of 3
Comparisons
| In 5 Years |
$54,944 (Total principal, interest, mortgage insurance, and loan costs paid) $0 (Principal paid off) |
|---|---|
| Annual Percentage Rate (APR) | 4.617% |
| Total Interest Percentage (TIP) | 81.18% |
Crucial Metric
Note the TIP (Total Interest Percentage). Over the life of this loan, you will pay interest equal to 81.18% of the loan amount. This is high because you are paying "Interest Only" for the first 5 years.
Other Considerations
- • Appraisal: We may order an appraisal to determine property value.
- • Assumption: We will NOT allow assumption of this loan on original terms.
- • Late Payment: If more than 15 days late, fee is 5% of monthly principal & interest.
- • Refinance: Refinancing depends on your future financial situation and market conditions.
- • Servicing: We intend to service your loan (you pay us).