A Good Faith Estimate (GFE) is one of the less confusing documents you will receive during the mortgage process.

And it’s your ticket to keeping your mortgage loan officer honest and making sure you get the deal you were promised.

The Good Faith Estimate (GFE) Explains Your Deal

A good faith estimate must be provided by a mortgage lender or broker to a customer, as required by the Real Estate Settlement Procedures Act (RESPA). The estimate must include an itemized list of fees and costs associated with your loan and must be provided within three business days of applying for a loan.  You will always get a GFE whether you are buying a new home or refinancing your existing home loan mortgage.

These mortgage fees, also called settlement costs or closing costs, cover every expense associated with a home loan, including inspections, title insurance, taxes and other charges. A GFE will also generally include your estimated monthly payment (known as PITI – Principal, Interest, Taxes, Insurance) based on the information that the lender has at the time.

How to Compare Mortgage Offers Using the Good Faith Estimate

A good faith estimate is a standard form which is intended to be used to compare different offers (or quotes) from different lenders or brokers.  You should always get a GFE before agreeing to work with a particular lender – never give them a credit card deposit before signing off on a GFE, and understand what your rights are to get out of any deposit in the event the costs vary significantly from the GFE.

When comparing lenders, many loan officers will tell you that you cannot compare GFE’s because they don’t all include the same fees.  That’s nonsense – the purpose of the GFE and the reason it uses a standard format is so that you as the consumer can compare offers.  The primary variable will of course be the interest rate as rates change daily and wont always be comparable if you get 4 GFE’s over the course of a week.  But all the other fees and charges are directly comparable and you can tell who is giving you the best deal.  Don’t worry about the impact of shopping lenders on your credit report – as long as all the inquiries to your credit report are made within 30 days the credit bureaus will treat them all as one inquiry – they understand that you are shopping around and there will be minimal impact on your credit score.  Read our credit guide for more on this.

Remember that the good faith estimate is only an estimate. The final closing costs may be different – sometimes very different.  If you see big differences between the GFE and your initial closing package documents, you should immediately escallate your issue with the lender – probably through their customer service group which is generally more lenient and sympathetic than the sales department.

Related posts:

1. $2,000 Mortgage or HELOC Closing Cost Discount – Daily Deal
2. 4.92% Mortgage Rates – How To Shop For Your Home Loan
3. What To Do If You Need Help To Pay Your Mortgage
4. Mortgage Rates at 5.05% – What You Need To Know Before Refinancing
5. 30 Year Mortgages Around 5.25% – Do You Qualify for a Mortgage Loan Modification?

Tagged as: Good Faith Estimate, home loan, Mortgage, Refinance, refinancing

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