So What is a Good Faith Estimate? A Good Faith Estimate (GFE) are documents that are required by mortgage lenders to provide to the consumer within 3 business days after the loan application is filled out and submitted. The Good Faith Estimate is an estimate of all the closing costs associated with the purchase of a home. Your lender is required to provide you with information on how much a loan will cost based on a quoted mortgage interest rate. Understanding the Good Faith Estimate can help you the consumer understand and compare mortgage rates and fees when comparing lenders.
What is a Good Faith Estimate of Closing Costs
The information included in a Good Faith Estimate will give you a pretty good idea of the closing costs, the annual percentage rate, and the amount that you the borrower are financing. That being said the origination fees on the GFE cannot be changed unless something changes with the circumstances of the loan. If that were to happen a new GFE will be provided by the lender. That being said there are other fees that might change slightly at the time of the closing settlement. These things might include things like credit report charges, title fees, appraisal fees, government recording charges and homeowners insurance.
Purpose of the GFE
The Good Faith Estimate is a document that is designed to help the consumer when purchasing a new home. Prior to the housing crises, there was a lot of predatory lending practices going on and unfortunately, on many occasions, the numbers changed when it came time to close on the home. Due to these practices, a new Good Faith Estimate was drafted to protect the consumer. With the new GFE, the borrower can feel confident that the fees are going to be very close to what is stated in the GFE. If the fees are not the same as what is stated on the GFE then the consumer can bring the discrepancy to the attention to the lender. By law, they will need to make the changes that were stated on the original GFE.
So the purpose of the GFE is to protect the borrower and it prevents lenders from adding and changing fees. With the new Good Faith Estimate, you can feel confident about the home buying process and know there will not be any unforeseen fee surprises at the time of closing.