It might be the most informative document you receive in the entire homebuying process: A good-faith estimate, or GFE, is a form provided by your mortgage lender that breaks down all of the charges, fees and terms associated with your home loan.
Your GFE also includes an estimate of the total you can expect to pay at settlement (or closing) — essentially, how big the first check you write will be. A mortgage provider is required by law to give you a GFE, or all information required to make such an estimate, within three days of receiving your loan application.
WHAT’S THE POINT OF A GFE?
A GFE will provide you with the necessary information about your loan, helping you compare loan offers with different lenders, terms and fee structures. But a GFE is not a binding contract, so if you decline the loan, you won’t have to pay the fees listed.
WHEN WON’T I RECEIVE A GFE?
The only time a GFE won’t be required by a lender is if your loan is denied before three days have elapsed. If that’s the case, the lender must, within the next 30 days, either tell you why your loan was denied or notify you of your right to ask why. If you are denied, you should ask for specific reasons. Credit reporting mistakes do happen.
Lenders can’t hold your GFE hostage by requiring you to provide documents such as pay stubs or W-2s to verify the information provided on your application. However, once they’re considering final approval of your loan, they can ask for additional information and will often require you to provide these or other documents.
WHAT SERVICES LISTED ON THE GFE CAN I SHOP AROUND FOR?
Though your lender requires certain services and will recommend providers, you can and should shop around; at the very least, you’ll then know whether the recommended provider’s estimate is reasonable. A few services to shop for include:
- Lawyer’s fees
- Title services and title insurance
- Homeowner’s insurance
If you’re unsure of what a fee includes or whether you can shop around, ask your lender for an explanation.
As with any estimate, things can change. For example, it’s not uncommon for your interest rate to change. If the lender wants to modify any of the terms of the settlement, a new GFE must be issued.
The GFE will be the first of many documents that you’ll deal with on your journey to buy a home. As with all of the paperwork, you have the right to understand every item, ask questions and be totally comfortable with the answers.
After all, every number on that list represents money out of your pocket.