Loan Costs is the disclosure category for origination charges and required third-party services connected with obtaining a mortgage.
Loan Costs is the Loan Estimate and Closing Disclosure category for origination charges and required third-party services connected with obtaining the mortgage. It consists of Sections A through C, totaled in Section D.
Loan Costs isolates the financing-related portion of upfront charges from taxes, prepaids, escrow funding, and other transaction items. This helps borrowers compare what lenders and their required service structures actually cost.
The category is not economically uniform. Section A includes lender and broker charges such as points and origination fees. Sections B and C contain third-party services, divided according to whether the lender permits provider shopping.
A charge’s section also affects how the borrower should compare it and which fee-change rules may apply. The heading is therefore more than visual organization.
Borrowers see estimated Loan Costs on page 2 of the Loan Estimate. They should compare the same loan type, loan amount, rate-lock status, interest rate, and points across offers before judging the totals.
The Closing Disclosure shows final Loan Costs and identifies whether third-party services were actually shopped. Borrowers should compare each section with the latest Loan Estimate and ask about unfamiliar services or changes before signing.
| Section | What it contains | Comparison approach |
|---|---|---|
| A. Origination Charges | Points and charges paid to lender or mortgage broker for making the loan | Compare total Section A with rate and lender credits |
| B. Services You Cannot Shop For | Required third-party services for which the lender does not permit provider choice | Compare the total across lenders |
| C. Services You Can Shop For | Required third-party services for which provider choice is permitted | Compare providers, scope, and written-list options |
| D. Total Loan Costs | Sum of Sections A, B, and C | Use as the financing-cost subtotal, not cash to close |
On the Closing Disclosure, Sections B and C are labeled according to services the borrower did not shop for and did shop for. The final placement can therefore reflect the borrower’s actual provider choice.
| Cost bucket | What borrowers should notice |
|---|---|
| Loan Costs | Sections A through C for origination and required loan services |
| Other Costs | Taxes, government charges, prepaids, escrow setup, and other closing items |
| Services You Cannot Shop For | Required services the borrower generally does not choose |
| Services You Can Shop For | Required services where the borrower may be able to choose a provider |
| Fee label | What it usually points to |
|---|---|
| Origination Fee | Lender or broker charge for making or arranging the loan |
| Discount Points | Upfront charge tied to obtaining a particular interest rate |
| Processing Fee | Lender charge for organizing and moving the file |
| Credit Report Fee | Obtaining credit information used in qualification |
| Appraisal Fee | Ordering or obtaining the property valuation |
| Tax Service Fee | Monitoring property-tax information tied to the collateral |
| Flood Certification Fee | Checking whether the property has a flood-insurance requirement |
Two locked Loan Estimates show the same loan amount and 6.5% rate. Lender A has $3,100 in Section A and $1,400 in Sections B and C, for $4,500 Total Loan Costs. Lender B totals $5,200. Before considering lender credits and Other Costs, Lender A’s loan-cost subtotal is $700 lower.
If Lender B provides a $1,000 lender credit, the borrower must include that credit and compare the payment and long-term rate cost rather than stopping at Section D.
Loan Costs differ from Closing Costs because Total Closing Costs combines Loan Costs with Other Costs and then accounts for lender credits.
They differ from Other Costs because other costs include items such as taxes, prepaids, and escrow setup that are not grouped under the loan-cost section.
They differ from Cash to Close because Loan Costs exclude the down payment and many transaction credits and adjustments.