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Mortgage Good Faith Estimate Overview

Mortgage Good Faith Estimate Overview

  • Great Mortgage IdeaPlease note that the Good Faith Estimate was replaced by the Loan Estimate effective October 3rd, 2015 and is no longer used in the mortgage process.  We provide the Good Faith Estimate overview and example below for your reference but encourage you to review the Loan Estimate instead
  • According to federal law, a lender must provide a Good Faith Estimate of the key terms of a mortgage including interest rate and closing costs, at the time the borrower submits a loan application.  The Good Faith Estimate is a powerful tool that the borrower can use to review and compare mortgage proposals from various lenders.  If a lender is unwilling to provide a Good Faith Estimate at the time you submit a mortgage application or request a mortgage proposal, this raises a significant red flag and you should consider working with other lenders.  Additionally, just because you submit a mortgage application or receive a Good Faith Estimate from a lender does not mean you are obligated to work with that lender.

  • FREEandCLEAR Mortgage Instructional Video

    Good Faith Estimate Overview Video

  • We recommend that you review Good Faith Estimates from multiple lenders carefully before selecting a lender to work with on your mortgage.  There are some key points about the Good Faith Estimate to highlight:

    • The Good Faith Estimate is a standard document that will be the same across all lenders. The figures change as proposals vary across lenders, but the form itself will remain the same – this allows you to more easily compare proposals from various lenders
    • As the name suggests, the Good Faith Estimate is an estimate of key mortgage terms. Just because it is an estimate does not make it any less valuable for the borrower to compare mortgage proposals and create lender competition for your mortgage business.
    • Use the Good Faith Estimate to shop mortgages and ensure that you are getting the best terms. This mandate is actually written on the form and we highly recommend this approach.
    • Obtain Good Faith Estimate forms from multiple lenders and use the table at the bottom of page three of the Good Faith Estimate to compare proposals
    • Prior to your mortgage closing, you can compare your Good Faith Estimate with the HUD-1 Statement to ensure that no additional lender costs or settlement agent charges have been added without your consent. The HUD-1 is a document that the closing agent must provide to borrowers that details the actual, final terms of your mortgage including total closing costs. Significant differences between the Good Faith Estimate and HUD-1 (e.g., an increase in interest rate or higher borrower costs), may be a sign that you are not getting the mortgage you thought you were.

    When reviewing a Good Faith Estimate, the key figures to focus on are “Your Adjusted Origination Charges” which are the fees charged by the lender and “Your Charges for All Other Settlement Services” which are the fees charged by non-lender service providers such as the appraiser, title insurance company, escrow company and attorneys (if applicable).  Both of these figures are found on the bottom of page one and a breakdown of these figures is found on page two.  Settlement charges are another name for closing costs and the “Total Estimated Settlement Chargers” box at the bottom of page one provides a good estimate of total closing costs.

  • Rate Details*
    Loan Program:  
    Monthly Payment:  
    APR:  
    Rate:  
    Points  More Info:
    Points: Fees you are willing to pay in order to get a lower interest rate. The number of points refers to the percentage of the loan amount that you would pay. For example, "2 points" means a charge of 2% of the loan amount.
     
    Total Lender Fees:  
    Loan type:  
    Property Value:  
    Loan to Value:  
    Credit Rating:  
    Date Submitted:  
    Monthly Housing Payments
    P & I More Info
    Principal & Interest: A periodic payment, usually paid monthly, that includes the interest charges for the period plus an amount applied to the reduction of the principal balance.
    Mortgage Insurance More Info
    Mortgage Insurance: The monthly cost for a policy that protects the lender in case you’re unable to repay the full amount of the loan. It is typically required for loans that have a loan-to-value ratio between 80% to 100%.
    (Estimated)
    Property Tax More Info
    Property Tax: (Also called "Real Estate Tax.") Property taxes are government assessments on real estate property. With mortgage financing, the local, county or state tax assessment on real estate property is considered part of the monthly housing obligation and typically collected and set aside by the lender ...
    (Estimated)
    Homeowner Insurance More Info
    Homeowner Insurance: or also commonly called hazard insurance, is the type of property insurance that covers private homes. It is an insurance policy that combines various personal insurance protections, which can include losses occurring to one’s home, its contents, loss of its use, or loss of other personal possessions of the homeowner, as well as liability insurance for accidents that may happen at the home or at the hands of the homeowner within the policy territory.lender ...
    (Estimated)
    Homeowner Association Fee More Info
    Homeowner Association fee: (HOA) fees are funds that are collected from homeowners in a condominium complex to obtain the income needed to pay (typically) for master insurance, exterior and interior (as appropriate) maintenance, landscaping, water, sewer, and garbage costs.
    (If Any)
    Total Monthly Housing Payments
    Lender Fees
    Points More Info
    Points Fees you are willing to pay in order to get a lower interest rate. The number of points refers to the percentage of the loan amount that you would pay. For example, "2 points" means a charge of 2% of the loan amount.
    Origination Fee More Info
    Origination Charge: A loan origination charge is a fee charged by the lender for evaluating, processing, and closing the loan.
    Credit Report Fee More Info
    Credit Report Fee: Fee charged to obtain an applicant’s credit history prepared by one or all of the three major credit bureaus. Used by lender to determine the borrower’s creditworthiness.
    Tax Service Fee More Info
    Tax Service Fee: A fee charged by the lender to cover the cost of retaining a tax service agency. These agencies monitor the property tax payments on the property and report the results to the lender.
    Processing Fee More Info
    Processing Fee: A processing fee is a charge by the lender for clerical items associated with the loan. Examples of processing include loan set up, organization of loan conditions for underwriting, and preparing required disclosures for the borrower.
    Underwriting Fee More Info
    Underwriting Fee: A fee charged by the lender to verify information on the loan application, authenticate the property’s value, and perform a risk analysis on the overall loan package.
    Wire Transfer Fee More Info
    Wire Transfer Fee: In most cases lenders wire funds to escrow companies to fund a loan. Commercial banks that perform this function will charge the lender so the fee is generally passed on to the borrower.
    (If Any)
    FHA Upfront Premium More Info
    FHA Upfront Premium: A fee paid in cash at the close of escrow or more commonly it is financed into the loan. These premiums are pooled together by the FHA and are used to insure the risk of borrower default on FHA loans. FHA upfront premiums are prorated over a five year period, meaning should the homeowner refinance or sell during the first five years of the loan, they are entitled to a partial refund of the FHA upfront premium paid at loan inception.
    (If any)
    VA funding Fee (If any)
    Flood Fee
    Other Fees More Info

    Other fees could be either additional Administrative Fees that a lender charges or it could be a Flat Fee to cover all lender charges such as: (Origination Fees, Points, Underwriting and Processing Fees, Credit Reports and Tax Service Fees)

    The flat fee does not include prepaid items and third party costs such as appraisal fees, recording fees, prepaid interest, property & transfer taxes, homeowners insurance, borrower’s attorney’s fees, private mortgage insurance premiums (if applicable), survey costs, title insurance and related services.

    Total Lender Fees
    *Actual rates and other information may vary. Sponsored results shown only include participating lenders. The information you enter on this page will only be shared with lenders you choose to contact, either by calling the phone number or requesting a quote.
    Current Mortgage Rates as of December 11, 2018
    • Lender
    • APR
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    Data provided by Informa Research Services. Payments do not include amounts for taxes and insurance premiums. The actual payment obligation will be greater if taxes and insurance are included. Click here for more information on rates and product details.
  • Sources

    Good Faith Estimate: http://www.dbo.ca.gov/Forms/doc/GFE-English.pdf

About the author

Harry Jensen, Mortgage Expert

Harry is the co-founder of FREEandCLEAR. He is a mortgage expert with over 45 years of industry experience. Over his career, Harry has closed thousands of loans for satisfied borrowers and now offers his advice and insights on FREEandCLEAR. More about Harry

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