A Good Faith Estimate is an estimate of all of your closing costs when purchasing or refinancing a home loan. Your Good Faith Estimate (or GFE) will give you a ball park figure of what rate your loan will be locked at and a rough estimate of what your monthly payments will be. Federal regulations require that your lender provide you with a GFE within three days of the day you applied for your home loan.
Like any type of mortgage document, the GFE can be challenging to read if you don’t have the proper guidance. Your GFE is typically three pages and it contains fees and fine print. Make sure that you recognize how each charge is allocated, who you are paying these charges to, and which fees you are being charged for up front versus which fees you will pay at closing.
Use your GFE to your advantage. The GFE doesn’t just show what costs you have to pay, but also what costs the lender and seller will pay. Be mindful of the fact that if the rate changes, if the loan amount needs to be lowered or raised, your GFE will change as well. You may in fact have a total of two or three GFE’s before the close of your loan.
Here’s a tip for you: the third page of the GFE discloses what fees can and cannot increase or change. If you were to go to the closing table ready to sign all of your paperwork and you notice that the numbers on your final documents are significantly different than the figures on your final GFE, stop and ask questions.
A good lender will be more than happy to explain any changes to you. Your GFE is your friend and essentially your tool to make sure that you are not overcharged or underpaying for any portion of your loan. When you are issued your Good Faith Estimate, read over it section by section. Pay close attention to costs and fees. If you have questions, contact your lender.