A good faith estimate, referred to as a GFE, was a standard form that (prior to 2015) had to be provided by a

mortgage A mortgage loan or simply mortgage (), in civil law jurisdicions known also as a hypothec loan, is a loan used either by purchasers of real property to raise funds to buy real estate, or by existing property owners to raise funds for any ...

lender or

broker A broker is a person or firm who arranges transactions between a buyer and a seller for a commission when the deal is executed. A broker who also acts as a seller or as a buyer becomes a principal party to the deal. Neither role should be con ...

in the

United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., ...

to a consumer, as required by the

Real Estate Settlement Procedures Act The Real Estate Settlement Procedures Act (RESPA) was a law passed by the United States Congress in 1974 and codified as Title 12, Chapter 27 of the United States Code, . The main objective was to protect homeowners by assisting them in becoming b ...

(

RESPA The Real Estate Settlement Procedures Act (RESPA) was a law passed by the United States Congress in 1974 and codified as Title 12, Chapter 27 of the United States Code, . The main objective was to protect homeowners by assisting them in becoming be ...

). Since August 2015, GFE has been replaced by a loan estimate form, serving the same purpose but following slightly different guidelines set by CFPB, so as to reduce consumer confusion. A good faith estimate (or a loan estimate) is a standard form intended to be used to compare different offers (or quotes) from different lenders or brokers. The estimate must include an itemized list of fees and costs associated with the

loan In finance, a loan is the lending of money by one or more individuals, organizations, or other entities to other individuals, organizations, etc. The recipient (i.e., the borrower) incurs a debt and is usually liable to pay interest on that ...

and must be provided within 3 business days of applying for a loan. Since RESPA does not apply to Business Purpose Loans, no GFE is provided in those transactions. These mortgage fees, also called settlement costs or

closing costs Closing costs are fees paid at the '' closing'' of a real estate transaction. This point in time called the ''closing'' is when the title to the property is conveyed (transferred) to the buyer. Closing costs are incurred by either the buyer or ...

, cover every expense associated with a home loan, including inspections, title insurance,

taxes A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures (regional, local, o ...

and other charges. The good faith estimate is only an estimate. The final closing costs may be different; however the difference can only be 10% of the third party fees. Once a good faith estimate is issued the lender/broker cannot change the fees in the origination box.

Fees and charges

The fees included within a good faith estimate fall into six basic categories: *Loan fees *Fees to be paid in advance *Reserves *Title charges *Government charges *Additional charges The following is a list of the typical charges. Each charge starts with a number – the same number as the number of the charge on a HUD-1 Real Estate Settlement Statement. This makes it easier to compare the charges a loan applicant receives on the good faith estimate to the

HUD-1 The HUD-1 Settlement Statement is a standardized mortgage lending form in use in the United States of America on which creditors or their closing agents itemize all charges imposed on buyers and sellers in consumer credit mortgage transactions. The ...

. 800 ITEMS PAYABLE IN CONNECTION WITH LOAN: *801 - Loan Origination Fee This fee is a charge for originating or creating the loan *802 - Loan Discount This is an upfront charge paid to the lender to get a lower

rate – the same as “buying the rate down” *803 - Appraisal Fee This is the cost of the independent appraisal. It is usually paid by the buyer. *804 - Credit Report This is the cost of the credit report *805 - Lender's Inspection Fee This is the lender's cost of inspecting a property – some may double check the appraisal provided by an independent appraiser *808 - Mortgage Broker Fee This is the upfront charge that a mortgage broker charges. Brokers can also earn a “rebate” from the lender which is not listed here *809 - Tax Related Service Fee Lender fee, usually small, for handling tax related matters *810 - Processing Fee This is the charge for processing the loan – collecting the buyer's application, running credit, collecting pay stubs, bank statements, ordering appraisal, title, etc. *811 - Underwriting Fee This is the cost of the loan underwriter (approver) *812 - Wire Transfer Fee This is the cost of wiring the money around, which is usually done by

escrow An escrow is a contractual arrangement in which a third party (the stakeholder or escrow agent) receives and disburses money or property for the primary transacting parties, with the disbursement dependent on conditions agreed to by the transacti ...

. 900 ITEMS REQUIRED BY LENDER TO BE PAID IN ADVANCE *901 -

Interest In finance and economics, interest is payment from a borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum (that is, the amount borrowed), at a particular rate. It is distin ...

for days X $ per day This is the prepaid interest for a mortgage loan. *902 - Mortgage Insurance Premium This is the prepaid mortgage insurance premium, if needed. This is the insurance premium some lenders charge for loans with little equity. *903 - Hazard Insurance Premium This is used to record hazard insurance premiums that must be paid at settlement in order to have immediate insurance on the property. It is not used for insurance reserves that will go into escrow. *905 - VA Funding Fee This is the

Veterans Administration The United States Department of Veterans Affairs (VA) is a Cabinet-level executive branch department of the federal government charged with providing life-long healthcare services to eligible military veterans at the 170 VA medical centers an ...

funding fee, which is only applicable if the loan is through a VA program. 1000 RESERVES DEPOSITED WITH LENDER *1001 - Hazard Insurance Premiums # months @ $ per month This is any prepayment of future hazard insurance expense *1002 - Mortgage Ins. Premium Reserves months @ $ per month This is any prepayment of future mortgage insurance expense *1003 - School Tax months @ $ per month This is any prepayment of future school tax expense *1004 - Taxes and Assessment Reserves months @ $ per month This is any prepayment of future tax expenses, such as property taxes *1005 - Flood Insurance Reserves months @ $ per month months This is any prepayment of future flood insurance expense *1008 - Aggregate Accounting Adjustment This is a credit to the buyer. By law, the lender is not allowed to collect more than the sum of initial payments for reserve items. The aggregate adjustment is the amount the lender must 'credit' the borrower at closing, so that they don't collect more than the law allows. 1100 TITLE CHARGES *1101 - Closing or Escrow Fee This is the cost of escrow. This is the service of a neutral party that actually handles the money between all the different parties in a real estate transaction, including: the lender, the buyer, the seller, the agents, notary, etc. This is often done by the “Title Company” – a related entity in the same office that provides title insurance *1105 - Document Preparation Fee This is the charge for preparing the loan documents. Lenders often email the loan documents to the escrow company, which in turn prints them out and reviews them before signing. However, some title companies are owned by an attorney who will also draw certain legal documents for the buyer's closing. *1106 - Notary Fees This is the cost of the notary. This is to have all of the legal documents surrounding this transaction notarized. When closing inside the title company office, there is usually no charge for this. *1107 - Attorney Fees Any legal charges associated with clearing the title to the property. *1108 - Title Insurance This is the cost of insuring the title of the property. If there is a question about title (who really owned the property), or if a judgment or lien was really paid off, after the transaction is done then this insurance protects the lender and owner from future problems. 1200 GOVERNMENT RECORDING & TRANSFER CHARGES *1201 - Recording Fees This is the cost of updating relevant government records *1202 - City/County Tax/Stamps Unavoidable government charge *1203 - State Tax/Stamps Unavoidable government charge *1204 - Electronic Recording Fee Many counties now allow documents to be recorded electronically. This expedites the issuance of a title policy by several weeks. 1300 ADDITIONAL SETTLEMENT CHARGES Anything 'extra' that is not included in the 800-1200 charges are itemized in the 1300 section. This includes things like the survey, HOA fees, and repairs. *1302 - Pest Inspection This is the cost of the pest inspector. Their purpose is to document the state of the property that the lender is making the loan on.

References

External links

FDIC Laws, Regulations, and Related Acts
{{DEFAULTSORT:Good Faith Estimate Mortgage industry of the United States

Fees and charges

See also

References

External links