View a
Good Faith Estimate
Form. It's a
mortgage broker's or lender's written proposal of your approximate mortgage closing
costs and associated home loan fees.
All brokers and direct lenders are required by (RESPA),
the federal Real
Estate Settlement Procedures Act to provide
all applicants with a written form estimate in good
faith
of
the mortgage home loan costs and fees that are due prior to and at closing. This
GFE must be provided within three business days of a borrower's application. These mortgage loan fees, also called settlement costs
estimated in good faith, should cover each and every
expense related to your home mortgage loan application. Examples include: inspections, title
insurance, lender fees, taxes and other charges. An
accurate and understandable form of good faith estimates is necessary for
a prospective client to make an informed and intelligent decision
about the financing expenses involved with their application. These forms should
be an honest and complete estimate made in good faith by the
direct lender or broker.
Borrowers should always ask for this in writing when shopping for a
refinance or purchase home loan as mortgage fees and interest rates will vary from lender to
lender. Try to shop
lenders or brokers on the same day as current
mortgage interest rates will change daily. Even
when pre-qualifying for approval, an
expense proposal should be requested. In selecting
a
mortgage broker or home loan
lender, request a “Good Faith Estimate” of costs and fees. Be sure
the lender discloses all associated closing expenses for the program you
applied or are applying for.
Also compare the APR or Annual Percentage Rate. At the same note rate, a lower APR means there are lower fees
associated.
California has a unique and special home
mortgage good faith estimates and loan cost disclosure form. It's called the
California Mortgage
Loan Disclosure Statement. It contains basically the same information in a slightly
different format. California, like other states, originate under the same federal laws but have
some state specific requirements as well.
It's only fair that the
borrower insist that the broker or lender stick to this projection, with some
degree of latitude.
The lender or broker must inform the borrower immediately and re-disclose any changes in the program, rate, pricing and closing costs.
Adjustable rate mortgages and the
interest payment only ARM require
additional disclosure due the their nature.
The lender can only make an educated guess
at the time of application as to what expenses such as attorney fees, title charges,
inspection and other variable expenses might be. They should be very close
though. If your credit report scores
come in different than stated, everything can change. These
expenses are set by others or chosen by the seller or buyer, not the
broker lender. However, the lender should be right on the mark with it's own fees.
As a general rule, the borrower should be concerned if the final closing costs
are more than 15% higher than the original GFE.
First of all, remember that the
amounts indicated in the GFE are projections based on the
lender's experience with the real estate industry and the area. The actual
closing numbers may
change as the transaction or terms changes. The good faith
estimates are prepared by the lender or broker based on industry norms for the
area. However, the lender
has no control over how much your attorney or the title company will charge for
their services.
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