Frequently Asked Questions About Good Faith Estimates

Before reviewing the list of common questions that are often generated in most discussions regarding Good Faith Estimates or GFEs, let’s first look at what this term really means.

A Good Faith Estimate is a quote for the estimates of the closing costs that the buyer will be responsible for when the transaction is completed. Per the Real Estate Settlement Act of 1974, mortgage lenders are required to provide hopeful buyers and those looking to refinance with information that is as accurate as possible. The GFE must be provided no more than three days after the loan application has been turned over to the lender.

GFEs are considered standard forms used by borrowers to compare different quotes from different mortgage lenders. For buyers, it is in their best interests to obtain at least two or more quotes from separate mortgage lenders. It must be noted that closing, or settlement costs can vary from state to state and even county to county. Detailed explanations may be needed if there are large monetary differences in the itemized lists of closing costs.

 Hopeful buyers on the verge of becoming bona fide homeowners are often surprised at the variety of expenses associated with settlement costs, such as fees for a credit report, title insurance, document preparation, the survey (when needed),  attorney charges, city and county tax stamps, title insurance, and more. In certain markets it’s not uncommon for the closing costs to be as much as 5% of the home’s total sale price.

GFE FAQs

• Are the costs associated with a GFE universal, or do they vary depending on the providers?

Just as with automobiles, electronics, home furnishings, and clothing, it pays to compare prices for the items listed in a GFE. When shopping, pay special attention to the actual lender fees. In doing so, you can make an apples-to-apples comparison on expenses that your lender actually has control over. Your lender does not control 3rd party fees such as homeowner’s insurance, title searches, attorney’s services, and title insurance. Borrowers can shop these services independently to seek out the best pricing.

• Is it possible that the final closing costs will be more than the GFE?

Your lender fees should be fairly spot on. However some of the line items on the GFE may vary from the HUD-1 (i.e. per diem interest, tax and insurance escows, etc)

• What should I do if something on my GFE is inaccurate or has changed?

Upon receiving the GFE, review it carefully. If there are any discrepancies, the lender must issue a new one with the corrections. Again, be aware that certain items are not fixed and stand as exceptions. Before proceeding to the final closing, buyers should carefully calculate all of the fees and the locked-in interest rate to double-check all of the required expenditures.