A Good Faith Estimate (GFE) is a form that lists basic information about the terms of a mortgage loan for which you’ve applied.
The GFE includes the estimated costs you’ll have to pay for the home loan. The Good Faith Estimate provides you with basic information about the loan including the Annual Percentage Rate (APR), which will help you:
- Compare offers
- Understand the real cost of the loan
- Make an informed decision about your loan choice
The lender or the mortgage broker must provide you with a GFE within three business days of receiving your application or other required information. You can’t be charged any fees until you get the GFE and indicate that you plan to take out the home loan. But you can be charged a credit report fee.
If the lender denies your application within three business days, it does not have to provide you with a GFE. Within 30 days, your lender has to tell you:
- Why your application was denied, or
- That you have 60 days to request the reason why it was denied
Fees and Charges
The fees included within a good faith estimate fall into six basic categories:
- Loan fees
- Fees to be paid in advance
- Reserves
- Title charges
- Government charges
- Additional charges
The following is a list of the typical charges. Each charge starts with a number – the same number as the number of the charge on a HUD-1 Real Estate Settlement Statement. This makes it easier to compare the charges a loan applicant receives on the good faith estimate to the HUD-1.
Tips:
Make sure what you get is really a GFE. Under the new rules, the lender has to provide a GFE within three days of receiving a loan application. Some lenders get around this requirement by handing out “work sheets” instead of GFEs.
The difference? Fee estimates on a work sheet don’t have to be accurate. By contrast, a GFE has accuracy requirements and the final closing costs may be different; however the difference can only be 10% of the third party fees. Once a good faith estimate is issued the lender/broker cannot change the fees in the origination box.
A fee underestimate — even if it’s an honest error — could cost a lender thousands of dollars.
Charges Which Can Increase Up To 10% At Settlement
The Good Estimate Estimate is an estimate based on available information at the time of application. Sometimes, service costs change. For this reason, the Good Faith Estimate may vary from your settlement statement by as much as 10% per item.
Only certain fees are included in this allowance, however. They include government recording charges, and title services fees and other required service for which you are allowed to shop and for which you chose a lender-approved service provider.
Mortgage applicants waive their right to the ten percent cap if they shop with non-lender-approved service provider. Note that lender is not responsible by law for mis-estimating the fees of a service provider with which is has no working relationship.
Use the GFE as a shopping tool. Making the GFE accurate was a means to an end. The regulators’ real goal was to encourage consumers to comparison-shop. The final page of the three-page GFE has a “shopping cart” that encourages borrowers to “compare GFEs from different loan originators.”
We encourage our clients to shop, whether it’s something significant, like title insurance, or perhaps something perhaps minor, like pest inspectors.
Know what the GFE doesn’t include. The GFE doesn’t contain all the information you need. It omits cash to close, which is pretty fundamental if you’re a borrower.
The old GFE estimated the size of the check that the borrower would bring to closing — the “cash to close”. The new GFE doesn’t. Some lenders provide this estimate in a supplemental work sheet. In this case, a work sheet is a good thing — so long as it’s offered in addition to, and not in place of, the GFE.
You don’t have to take the mortgage loan even if you receive a GFE. The lender also doesn’t have to give you the loan even if it provides a GFE.
If you, or someone you know is considering Buying or Selling a Home in Columbus, Ohio please contact The Opland Group. We offer professional real estate advice and look forward to helping you achieve your real estate goals!
The Opland Group Specializes in Real Estate Sales, Luxury Home Sales, Short Sales in; Bexley 43209 Columbus 43201 43206 43214 43215 Delaware 43015 Dublin 43016 43017 Gahanna 43219 43230 Grandview Heights 43212 Hilliard 43026 Lewis Center 43035 New Albany 43054 Pickerington Powell 43065 Upper Arlington 43220 43221 Westerville 43081 43082 Worthington 43235
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