What type of estimate is typically provided by lenders before closing a mortgage?

The type of estimate typically provided by lenders before closing a mortgage is known as a good faith estimate. This document outlines the expected costs associated with a mortgage, including the loan amount, interest rate, monthly payments, and an itemized list of closing costs.

The purpose of the good faith estimate is to give potential borrowers a reasonable expectation of the financial obligations they will incur if they proceed with the loan. It is especially important as it allows borrowers to compare offers from different lenders, ensuring they can make informed decisions based on the quoted rates and fees.

While a loan estimate also provides similar information and is required under the TILA-RESPA Integrated Disclosure rule, it is a more modern version introduced following regulatory changes in 2015. The term good faith estimate has historically been used prior to these changes and is still widely recognized, but it’s important to understand that the loan estimate serves a similar function in today’s market.

A closing statement details the final charges and credits at the time of settlement, which is provided much later in the process, not before closing. A pre-approval letter indicates a lender's preliminary assessment of a borrower's ability to secure a loan but does not break down costs. Therefore, in the context of early-stage estimates