Good Faith Estimates

How much does a mortgage cost? Are all mortgages the same price? How do I tell if I’m paying too much? Anyone  who is trying to buy a home, especially if thy’ve never done it before, needs to know to ask questions like these. While there might be very little room for lenders to fluctuate interest rates, they do have flexibility in the fees they may charge to process your loan.

Lenders are required, however, to provide a good faith estimate (GFE) within three business days after application for a loan. The GFE should provide the borrowers an estimate of the settlement costs likely to be charged to close the loan. This document should clearly show all fees the lender intends to charge to make the loan. Believe me when I tell you that there can be a world of difference from one lender to another in loan costs. Do not be fooled by the allure of a lower interest rate until you know what it is going to cost you to lock in that rate. 

One recent example I have seen is two GFEs for the same borrower, for the same property, applied for at the same time, with a difference of over $8,000 in fees between the two loans. And the GFE with the lower interest rate had the lower fees!

My advice to anyone applying for a mortgage is to make sure you get the good faith estimate, and if you don’t understand it, ask your lender for a detailed explanation. If you’re working with an experienced Realtor®, ask him or her to review the document with you. That’s part of their fiduciary responsibility to you. Do not enter into the biggest financial decision of your life with unanswered questions.


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