Why is it important for borrowers to receive a Loan Estimate?

The Loan Estimate is a crucial document for borrowers as it provides a comprehensive breakdown of the loan terms, including the interest rate, monthly payments, and all closing costs associated with the mortgage. This transparency empowers borrowers to effectively compare different loan offers from various lenders, ensuring they make informed decisions. By outlining key details in clear language, the Loan Estimate helps borrowers understand what they are agreeing to financially, which is essential in avoiding surprises later in the loan process.

The other options do not accurately reflect the purpose of the Loan Estimate. While it is not a final loan approval document, the Loan Estimate is an initial disclosure that lenders provide to aid borrowers in decision-making. The statement about its legality pertaining specifically to large loans is also inaccurate; the Loan Estimate is required for all applicable loans, regardless of size. Lastly, it does not guarantee a lower interest rate; rather, it is a tool to help borrowers understand and compare different loan options available to them.