What is a ‘good Faith Estimate (GFE)’
Good faith estimate (GFE) allows a mortgage consumer to compare offers, understand the real cost of the loan, and make an informed decision when choosing a loan provider. In the GFE lists the necessary information about the terms of a mortgage loan that the lender offers. All lenders are required to use the same valuation standard form loan and of receiving any form of assessment is not a commitment to make a mortgage loan.
Act the real Estate settlement procedures requires the completion of a fair evaluation.
Breaking down the ‘good faith estimate (GFE)’
The good faith estimate (GFE) form is standardized across the industry to allow borrowers to compare costs between lenders. The document will include a detailed list of all estimated amounts due at the closing of the mortgage. Closing fees, also known as the costs associated with calculations and includes attorney fees, title search, recording and stamps the document or taxes, survey fees and other related expenses.
From October 2015, based on the estimated loan replaces the GFE for most types of mortgage loans. Borrowers applying for a home equity line of credit (HELOC) manufactured housing loan is not secured by real estate, or credit through certain types of homebuyer assistance programs will not get the GFE or loan estimate, but must receive a truth-in-lending disclosure.
The lender must provide the GFE to the borrower within three business days of receipt of a completed application for credit or other Bank-required information. Borrowers can be charged, credit report prior to receipt of GFE, but will not be charged any additional fees. After the borrower receives a good faith estimate, they indicate that they wish to proceed with a mortgage loan from one financial institution to another.
Consumer protection in GFEs and evaluation of credit
There are legitimate reasons for the discrepancies between the good faith estimate and actual closing costs. For example, a lender may not know all the cost of closing services provided by third parties, which could be considered hidden costs in owning a home. Based on the estimated loan is written in plain language and was designed to help consumers better understand mortgage terms to which they apply. Borrowers can shop around and get several estimates before choosing a loan or lender.
Consumers should beware of unscrupulous lenders may add fees or charge excessive fees for administrative matters such as Bank transfers. Formal standardized evaluation forms provide information on the approximated costs of taxes and insurance and how the interest rate and payments may change in the future.