What Is A Good Faith Estimate?

What is a Good Faith Estimate?

-A form provided by your lender that gives you basic information about the cost of your loan-

The GFE is required by law. Prior to 2010 the GFE was purely and estimate. Lenders are now commited to most of the dollar amounts quoted on the estimate. The final costs might differ slightly from those on the GFE, but only the third party costs, and by no more than 10%

The GFE is not a contract. Reviewing the GFE does not obligate you to accept the loan, nor does it obligate the lender to make the loan. 

-A standard form used by all lenders and brokers-

Each box on the forms you receive from competing lenders or brokers must contain the same information so that you, the borrower, can compare the loans in a way that makes sense. The codes on the form correspond with HUD's settlement costs codes. For example, a code 1106 charge always refers to notary fees. Once the GFE is issued, the lender or broker cannot change the dollar amounts in the origination box. 

What fees and charges are on the GFE?

The GFE will include origination fees and settlement fees. A few of the figures you are liekly to see on a GFE include:

>Your Monthly Payment	>Your Interest rate
>Property Appraisal Fee	>Credit Report Fee
>Broker Fee	>Application Fee
>Underwriting Fee	>Wire Transfer Fee
>Rate Lock Fee	>Title Search Fee
>Document Preparation Fee	>Title Insurance
>Recording Fee	>Home Inspection Fee
>Prepaid amounts such as: taxes/insurances

What Does the Borrower do with a GFE?

-Pay close attention to the fees that the lender controls directly-

Third party fees (title search, notary, title insurance and so on) are fairly consistent in the industry and won't vary much from one GFE to another. Taxes and government fees should be the same no matter what lender or broker you choose. The major differences will be in the lender/broker controlled fees like underwriting, mortgage insurance application or tax-related service fees. 

Your lender cannot guarantee costs if you choose your own provider of third-party services. If you choose to use a title company, real estate attorney, notary public, or other third-party vendor not on the lender's approved list, the lender understandably cannot predict or control the cost and is not obligated to honor any price noted on the GFE. 

-Check out the lender’s/broker's reputation-

Details on a GFE can be changed up to 3 days before closing. Unscrupulous lenders/brokers in the industry may use that as a bait-and-switch loophole, luring you to a favorable loan only to change the terms at the last minute. Reputable lenders will not, as a matter or course, change (Or “redisclose”) pertinent loan details at such a late stage in the process. Ask your lender if they expect any details to change or fluctuate the interest rate for example, during the weeks leading up to closing.