Mortgage Savvy: The Good Faith Estimate


Consumers spend countless hours comparison shopping for items such as cars, electronics, and even blow-dryers, but, for some reason, they sometimes lose their common sense when it comes to purchasing a home. Comparing offers from multiple lenders is a common – and common sense – practice during the home-buying process. The Good Faith Estimate (“GFE”) helps you compare lenders and make an informed decision about which one to choose.

SEE ALSO: Must Know Facts For Mortgage & Refinancing

GFE Overview

The GFE is an estimate of the fees due at closing. It provides borrowers with a report of the lender’s fees and terms, the interest rate, and third-party charges. The law requires your lender to provide you with a GFE within three days of your loan application. Once a lender gives you a GFE, it must honor those terms if you accept them within the stated time period. Loan experts recommend that you request GFEs from at least two lenders before committing to a loan. When you receive your estimates, you can expect the following:
  • Origination Fees: The origination fees consist of lender fees, the interest rate, points, and transfer costs. Borrowers use this section to compare loans, because the fees are directly controlled by the lender and subject to negotiation. The estimated origination fees are fixed and will not change at closing.
  • Settlement Services: This section lists charges for settlement services, such as title insurance, government charges, and title company services. If the fees escalate to more than a 10 percent difference at closing, the lender is responsible to cover the difference. These fees are similar among lenders because they are established by third-party companies. Taxes and government fees are generally identical, regardless of the lender you choose.
  • Fluctuating Fees: The final section of the GFE lists fees that can change at any time, such as the daily interest rate, settlement fees not associated with companies identified by the lender, and homeowner’s insurance.
At the bottom of the GFE there is a four-column table with empty spaces. Fill out this chart so that you can assess and compare features for up to four lenders.

SEE ALSO: Fannie Mae Mortgages for Public Servants

Tradeoff Table

The GFE also lists a tradeoff table that displays potential loan adjustments. If you want the same loan with lower settlement charges, for example, your interest rate will increase. The table will outline how much you’ll save in settlement fees, along with the monthly payment change, at the higher interest rate.  Ask your lender to complete this table so that you can compare your options. A prepared borrower is a smart shopper. Whether negotiating a deal with a slimy car salesman, or comparing quotes from several plumbers, receiving multiple offers puts you in the driver’s seat and keeps you in control of your purchase decision. Do your homework and spend time analyzing the details of each GFE. Obtain the assistance of a professional if necessary, so you can make an informed decision.

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