Clients ask, “What is a GFE?” A Good Faith Estimate is a document that is prepared by your mortgage lender during your qualification process. Most lenders will then update the GFE when you have found the exact property you want to purchase. It will outline the loan and the costs associated with securing that loan.
It will show you lenders fees. There is normally an origination charge, standard is 1% of loan price. If you are being charged more than 1%, you need to know why. There are processing fees, underwriting fees, appraisal fees and credit report fees. If there are a number of extra fees on your lenders GFE, you need to find out why.
There are closing costs on the GFE….. everything from escrowed homeowners insurance and ecrowed property taxes to keep in reserves to wire transfer fees.
The purpose of the GFE is to lay out for the buyer, what the costs of the loan are. Some will simply compare the bottom line, but i urge you to look at the entire GFE with scrutiny. You may pay $50 less with an internet giant, but with a trusted local company you will be better informed on the process and have LIVE people to talk to. Is that worth $50 to you?
The point is, if you are a first time home buyer or a seasoned investor, you need to know what the loan will cost. in some cases, the fees are simply junk fees and could be removed if the client asks. Other times it will show that you are not overpaying for the loan and it has nothing but the standard expenses attached to it. Unless you look at your GFE when you are buying a home, you will not know the answer to that question.
A GFE from a solid lender is, in fact, a very important tool, especially for buyers who don’t have a lot of room to spare in their wallets.
Comment by Steve Howe — December 9, 2008 @ 8:46 pm
Hey Nichole,
I know for certain that my clients are much more satisfied after closing when they take the time to dissect the GFE at least a week before we get to the closing table. Stellar post!
Comment by MN Foreclosures — December 17, 2008 @ 1:45 pm
[...] the loan officer should have everything together. Nichole Frederickson wrote a great post about good faith estimates, and why they are so important to home buyers. Categories : Buy MN Foreclosure [...]
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