The Good-Faith Estimate is a document that includes the breakdown of approximate payments due upon the closing of a mortgage loan. The GFE helps borrowers shop and compare costs of loans with lenders. Smart shoppers apply for at least two loans and use the GFEs to determine which lender to use.
Some fees are paid by the buyer and some by the seller. The charges fall into these categories:
- Loan fees
- Fees to be paid in advance
- Reserves or escrow paid to third parties
- Title charges
- Government charges
- Additional charges
Receiving a GFE
Lenders are required by law to give you the GFE within three business days of receiving the loan application. The GFE must be mailed or hand-delivered by the end of the third day.
A mortgage broker will also send a GFE if you use a broker to apply for a loan. You will receive another GFE from the lender shortly after the lender accepts your application.
Accuracy of a GFE
The lender's GFE should be more accurate than a mortgage broker's GFE, but some numbers are likely to change. For example, third-party fees on the GFE, such as the title company fees, could change because the title company you use for closing charges different fees.
The lender's fees on the GFE may be more accurate because they know their own fees, but these fees can fluctuate. So be prepared for any fees to increase. Rarely do they decrease before the closing.
Since the GFE is only an estimate, your actual fees will be listed on your settlement documents given to you right before closing.
Fees to expect in the GFE
Application Fee: This is the processing charge paid when submitting the loan. It may be rolled into other fees.
Appraisal Fee: Pays for an independent appraisal of the home's value, which is not the same as the home inspection.
Attorney Fees: This fee covers the cost for the lender's attorney to prepare and review all of the documents needed to close your loan. Sometimes the cost for the seller's attorney is included in this fee.
Credit Report Fee: This is a charge to have the lender pull your credit history from one or all of the three major national credit bureaus: Equifax, Experian and TransUnion.
Discount and Origination Points: Points you may be charged are equal to some percent of the loan amount and would lower the interest rate or cover the costs for creating the loan.
Escrow Account: Although not really a fee, it is the upfront, prepaid amounts the lender requires in order to pay homeowners insurance, private mortgage insurance and property taxes.
Flood Certification: If required, you'd have this charge for running a check to verify that the property is not in a flood zone.
Interim Interest: This is accrued interest from the closing date until the end of the month.
Survey Fee: This charge covers a survey of the property to verify its official boundaries or property lines.
Title Search and Title Insurance: The title search includes examination of deeds, court and property records to determine the legal owner of a home and if there are any liens or claims against the home.