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gfe

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Good Faith Estimate of closing costs and loan fees - ( GFE )

A Good Faith Estimate is a lender's written proposal as to what your closing costs and loan fees will be associated with your real estate financing request. Request your GFE Now.

It's always a good idea to request a good faith estimate in writing when shopping for a home loan because mortgage fees and interest rates can and will vary from lender to lender. Another important consideration is to shop lenders on the same day as current mortgage interest rates do change daily.

A mortgage lender or broker is required by the federal Real Estate Settlement Procedures Act (RESPA) to provide a prospective home buyer with a good faith estimate of the loan fees due at closing within three days of a borrower applying for a home loan. These mortgage loan fees, also called settlement costs, should cover every expense associated with your home loan transaction. Examples include: inspections, title insurance, escrow, attorney, lender fees, broker fees, taxes and other charges. An accurate Good Faith Estimate is essential for a prospective refinance client or home buyer to make an informed decision about the estimated settlement costs associated with their new home loan.

In choosing a home loan lender, always be sure to request a comprehensive “Good Faith Estimate” making sure the lender discloses all closing costs and fees for the loan you are seeking. In addition compare the APR (Annual Percentage Rate) from one lender to another. For the same interest rate, a lower APR means that there are lower fees associated with obtaining the loan.

The borrower should hold the lender to this estimate of loan fees, with some obvious leeway. The lender must inform the borrower immediately of any changes in the loan program, rate, pricing and closing costs. Obviously, the lender can only guess at the time of application what expenses such as attorney fees, title charges, investor fees, inspection costs and other such variable expenses will be. The estimates should be close though. These expenses are set by other parties or chosen by the seller or buyer, not the lender. However, the lender should be accurate with it's own fees.

As a rule of thumb, the borrower should be concerned if the final closing costs are more than 15% higher than the original estimate. The exception is if the borrower is fully informed by the lender beforehand that these items will be higher, and the borrower accepts. Note also that other expenses not anticipated by the lender may appear during the loan processing period. If they are legitimate, they will often be unavoidable.

First of all, remember that the amounts indicated in the GFE are projections based on the lender's experience with the real estate industry and third parties in the area. The numbers projected may change as your loan, closing and transaction terms develop. The good faith estimate is prepared by the lender based on industry norms. However, the lender has no control over how much your attorney or the title company will charge for their services.

You should be able to count on your final expenses to be very close to the projections provided in good faith estimate. A good rule of thumb is that your final closing figures should be within 10-15% of the estimated amounts. This should especially be true with the lender charges, unless there are significant changes in the loan program or your qualification.

Note: a "point" is one percent of the loan amount. A fee of 2 points on a $100,000 loan is $2,000; a fee of 5 points on a $50,000 loan would be $2,500. Points are normally tax-deductible for homeowners if paid in cash at closing.

Please remember that there are often options to eliminate closing costs.

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