Features of Good Faith Estimate

A good faith estimate or GFE, as it is popularly known is one of the most important documents that start of the process of mortgage. This is a statement that has to be provided by the bank or broker or lender to the customer, and has all details of the charges connected to the entire process. These regulations are as per the Real Estate Settlement Procedures Act (RESPA). The estimate shall include an itemized list of fees and costs associated with the loan and must be provided within three business days of receipt of loan application from the customer. The biggest advantage of getting a GFE from a bank is that it helps the customer to compare different costs by getting quotes from different lenders.

Earlier, these estimates very only considered to be an approximate estimate. The final closing costs may be very different from what was estimated earlier. But, of late, the government has provided certain protection for the customers by way of limiting alterations to good faith estimates. The fees listed in the GFE, which are mostly closing costs cover majority of the expenses associated with the home loan; and even include inspection charges, title fees as well as taxes.

The fees included within a good faith estimate fall into different basic categories. These are Loan fees, Fees to be paid in advance, Title charges, government charges, Reserves as well as any additional charges. Depending upon the type of charge, these are given serial numbers starting from 800 series till 1300 series. The 800 series involves payments that need to be done by the mortgagee as far as certain charges towards the loan application as well as home maintenance and taxes are concerned, and include inspection charges, loan related fees and charges, broker fees, underwriter fees, processing fees and similar charges.

The 900 series of payments is concerned with advance payments that include insurance premiums as well as interest payments. The 1000 series relate to reserves such as insurance premium and tax reserves, whereas 1100 series is mostly connected to title charges and cover title inspection fees as well as title transfer charges. The 1200 series is concerned with government related fees such as registration charges while 1300 series of expenses cover the final settlement charges.

Reading a good faith estimate in the right way is important as you need to understand the various clauses and hidden charges that many banks try to squeeze in so that they can make decent profits. Being an informed borrower may save you from unexpected, out of pocket expenses at the closing table and/or a higher loan amount than anticipated. Getting a thorough Good Faith Estimate is as important as understanding it. If any questions or concerns arise, communication between you and your Loan Consultant is vital.

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