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Understanding the Good Faith Estimate (GFE)

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:

Lender Fees

  • Loan origination fee

  • Processing fee

  • Underwriting fee

  • Inspection fee

  • Points

    Third-Party Fees

  • Appraisal fee

  • Title search and insurance

  • Home inspection

  • Government recording fee

  • Tax certification

     

    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 great day.

Posted in:Education
Posted by Jackie A. Graves, President on October 30th, 2014 8:16 AM

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