Qualifying for a Home Loan - What is Good Faith Estimate?

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 Good Faith Estimate

One of the intimidating things about getting FHA, conventional or VA loans is the amount of documents you will receive from the lender. Most people find themselves not getting the answers they need regarding these documents. To prepare yourself with loan application process, a document that you may receive is Good Faith Estimate (GFE).

Defining Good Faith Estimate

The Good Faith Estimate is a mortgage document breaking down estimated payments to settle after closing your loan. Every lender where you applied for a loan should give you this estimate form to use for comparison purposes. The availability of this form is the reason why experts recommend sending loan applications to two or three lenders to find the best deals.

When to Receive GFE?

By law, lenders must give you this form three business days after receiving your loan application. This form is either mailed or hand-carried to your mailing address within the third day, which gives you an ample time to compare offered deals.

If you hire a broker, he should also send you the same form within the same timeframe. Then the lender itself will send you another GFE copy.

People who filed for loans before October 2015 will receive this form upon applying for mortgage refinancing.

GFE Accuracy

You can be confident in the accuracy of GFEs, especially if they are sent by the lenders themselves. Their GFEs tend to more accurate than those from mortgage brokers.

While accurate, keep in mind that some fees in GFEs may change depending on the service providers involved in the application process. Lender's fees should be accurate on this form because they know their actual fees. However, these fees can increase or decrease depending on market conditions or policies changes within the company. Be prepared for possible fee increase before closing.

Third party fees usually have changing value depending on their fees. For example, using another title company than the one listed on GFE may result to different prices in the end since they have their own policies.

Whether you're applying for conventional or FHA loans, be sure to read these estimates accordingly to ensure you'll save money and make the most out of your loan.

Understanding GFE and Its Details

There are several fees included in GFEs. Typical fee categories they fall into are loan fees, escrow fees, government charges, title fees, other fees to paid in advance, and other miscellaneous fees. Your GFE will have several lines or tables that combine some of your fees, giving you the total costs to settle in getting the lenders' deals. At this point, you can clarify unclear values stated on the document to help you compare their services better.

Accompanying Fees

The fees mentioned above give you the fee categories while this section will give you an idea about typical fees included in the form:

Application fee is the processing fee often charged by lenders to people applying for a loan. Some lenders may waive this fee, but a lot of them don't, but it can be rolled together with other charges.

Attorney fee covers the lender's legal expert's services in reviewing mortgage-related documents together with other preparatory procedures that come with home loan application. The seller's lawyer's fee may also be included in this charge.

Appraisal fee is the amount given to independent appraisal of the property's value. This is different from home inspection charges.

Lenders may charge credit report fee as part of pulling out your credit records from one of the three main credit bureaus. This fee may vary depending on which credit bureau lenders pulled your record.

Survey fee is the fee charged for surveying a property to check if it's within the official property lines or boundaries.

There are still other fees included in GFE depending on the number of service provider involved in the mortgage application process.

Changes with GFE

GFE is already a thing of the past considering the changes that occurred in October 2015. This form is now replaced by Loan Estimate form, which has the similar information needed for comparing loan deals. However, the authorities made this form easier to understand and simplified to keep buyers from being intimidated with obtaining a loan.

GFE or the new Loan Estimate form is important in mortgage application process. After checking your credit score for home loan, be sure to submit and get this form from your lender. It will help you compare loan deals to save money and make your loan easy to handle than expected.