The GFE is a list of all the closing cost that are involved in the loan; such as discount points, processing fees, underwriting fees, title fees, taxes and insurance, and any other fee that might be associated with the loan. 800 section of fees- charges from the broker, 900 section ?charges required by the lender(pre paid interest, mortgage insurance, etc) 1000 section- reserves required by the lender(taxes and insurance), 1100 section- fees charged by the title company(closing fee, title search, title insurance, etc) 1200 section- fees required by the local government( recording of the loan, etc)Borrowers must understand that there is no requirement in the law that the Good Faith Estimate be accurate within any certain percentage to the fees that are actually charged at closing. It is only required to be issued "In Good Faith", a somewhat arbitrary standard that is difficult to prove one way or another.
Working with an experienced, licensed and knowledgeable mortgage professional rather than just whoever purports to have the lowest rate will likely increase a borrowers chances of having very similar fees at closing to those shown on the GFE.
There are several reasons why the GFE may change from when it is originally disclosed to what is represented at closing. If the loan amount changes this will affect any points on the loan as well as some of the title charges. If the date of closing changes this will change the per diem interest. Estimates may be included for the taxes and insurance, when the actual numbers are determined this can change the GFE. If the broker needs to change lenders for one reason or another this may change some of the fees, as each lender has different fees that they charge. If the rate changes for some reason (borrower's credit drops and they no longer qualify) this can affect the closing costs.
There are many acceptable reasons for the GFE to be inaccurate and have some small changes by the time you get to closing. If the changes are major make sure you have your broker walk you through the original and final GFE and explain any discrepancies. Don't be afraid to ask questions. There are some changes that may not be acceptable to you such as additional points. If this is the case try to negotiate with your broker, don't be afraid to walk away. In most cases you are entitled to a copy of the final HUD-1 at least 24 hours prior to closing.
The Good Faith Estimate along with the Truth-in-Lending is required by law to be given to borrower within 3 days of applying for a mortgage. They need to be signed and dated by borrower to ensure compliance.
The best way to determine which lender actually offers you the best mortgage deal is to carefully examine each lender's closing cost estimate. Be aware however, that not all closing cost estimates are alike. In an attempt to make themselves more attractive to customers, some lender's closing cost estimates leave out significant fees. Generally speaking, a Good Faith Estimate should include the following: the loan origination or broker fee; points; prepaid homeowner's insurance; an appraisal fee; title search and insurance; tax adjustments; and mortgage insurance if you are putting less than 20% down.
A Good Faith Estimate is just that, an estimate and subject to change. In fact, final closing costs cannot be estimated until closing when the final HUD-1 settlement document is presented.
People often believe that the Good Faith Estimate is the best way to compare loans. In fact, that is not true. The Truth-in-Lending disclosure (TIL), which also takes into account your APR, is a more accurate way to compare loans, in terms of their cost to you.
The fees listed on the GFE are estimates only. Depending on many factors, your GFE may change during the loan process, and for that reason it cannot be considered a commitment to lend.
The charges can vary on the Good Faith Estimate. Escrow accounts will vary depending on how many months need to be set-up, when you close will affect the prepaid interest, different lenders will have different fees, and some general fees are added which may not be needed such as a survey or a pest inspection.
The Good Faith Estimate is only an estimate or range of charges. For example, the lender may not know the costs for a settlement agent that you choose, or the exact amount that will be collected for an escrow account for taxes and insurance.
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