October 30th, 2014 8:16 AM by Jackie A. Graves, President
The Good Faith
Estimate, or GFE, is an extremely important part of the mortgage process. As a
mortgage consumer or client, the GFE is the main way you compare and understand
the costs and fees of a mortgage.
Home loan lenders and mortgage brokers are
required to provide a GFE to all clients as part of the Real Estate Settlement
Procedures Act (RESPA). The GFE must include an itemized list of fees/costs of
getting the mortgage and must (by law) be provided within three days of applying
for a loan.
The costs listed on
the GFE are commonly referred to as closing costs, and the GFE isn’t final. The
costs can change for a variety of reasons; one of the most common reasons is
that the mortgage rate changes and costs are affected (either up or down).
For example, when I got my 30-year loan a few years back, my home appraised
for about $25,000 more than I had estimated. Because of that, and because my
GFE was prepared on the estimated lower value, the LTV (loan-to-value) of my
mortgage improved and my rate actually dropped a little bit. As you can
imagine, I was one happy borrower. One other thing to note is that the GFE
third-party costs can only rise 10% from the estimate.
The fees included
within a Good Faith Estimate fall into two categories, lender fees and
third-party fees. Here are some examples of fees you might have to pay:
Loan origination fee
Title search and insurance
Government recording fee
I could go on for
days about GFEs, but instead, I think you’ll prefer watching my friend Ron discuss
them in the video below. With that, I hope you enjoy the video and find it
useful. Tell us what you think in the comments, and let us know if there are
any topics you’d like us to present in our next video on The Scoop blog. Have a