Good Faith Estimates Explained
05-02-2008 10:13 PM
Receiving a good faith estimate (abbreviated as GFE) is an important step in determining if the loan you are being offered is a good one for your situation. A GFE includes the proposed interest rate, the term of the loan (XXX/YYY is the typical format, where XXX is the months the payment is amortized over and YYY is the months the loan is due in), a line by line description of the anticipated fees being charged on the loan (all together are called settlement costs), the estimated funds to close (or in some situations, such as a refinance, or on some purchase transactions, you could be getting some cash back at closing), and the proposed monthly payment. The GFE is required to be provided to you within 3 days of a complete application being taken or your credit report being run.
Remember this is a good faith estimate, and while it should be very close to what is expected to be on the final closing statement (called a Final HUD-1 Settlement Statement), some figures can change, including the interest rate if the rate hasn’t been locked in, and various costs from third parties (title, appraisal, escrow, pre-paids/reserves). What should remain the same, unless agreed on by both the originator (broker or lender) and the borrower (you), are the costs in Section 800, “Items Payable in Connection with Loan”, with the exception of the appraisal fee.
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