Good Faith Estimate (GFE) of Settlement Costs
The Good Faith Estimate of Settlement Costs, also known as “GFE”, is one of the most important documents you will receive at the time of application. Federal law requires that you receive this document within three (3) business days of your application. However, with current technologies, this document can usually be delivered quickly and typically should be delivered at the time of application, or at least within one business day. RESPA (Real Estate Settlement Procedures Act) requires that the lender or mortgage broker provide you with the GFE showing you a list of chrges and fees associated with obtaining your home loan.
Demonstrating the need to have an unbiased professional on your side, statistics show that only about 1 out of every 4 home loan applicants actually receive this document prior to their closing. There are varying reasons why this may be the case, but the bottom line is that if you don’t receive a GFE from the lender within three (3) business days at the latest, you should not work with that lender, period.
Why is it important to receive the GFE? Well, the intent of the GFE is to provide a written document upon which you can shop and compare lenders in an effort to find the best deal. However, there are drawbacks to this approach which you need to be aware of. First off, mortgage rates change daily and the rates and fees told today will not likely be the same three business days later, let alone the very next day. In fact, mortgage rates can change within minutes of you applying, making the whole mortgage “shopping” process difficult at best.
Mortgage Air™ monitors mortgage rates in real time and can assist you in the shopping process. We cannot stress the importance of demanding a GFE at the time of application, even before, in order to shop around and make a more apples to apples comparison. We are more than happy to review as many GFEs as you can obtain and assist you, though we will not actually recommend one lender over another, the final decision is yours.
Your Mortgage Pilot™ will review the document, detailing each line, and inform you of what each line means. He will also highlight specific fees and charges related to the loan program and discuss the interest rate. The goals during this review are to prevent the following:
- Higher than market interest rate
- Excessive loan fees and junk fees
- Loan program matches your needs
- Disclosure of all fees, no hidden charges
- Accuracy of charges
One thing you must understand is that this document is exactly as the name implies, an estimate. The costs listed are not guaranteed, though once you lock your loan, all lender fees should not change again without some justifiable reason. Currently, laws do not require that the lender adhere to these costs, though there are may be limitations on how much they can change. Rest assured that your Mortgage Pilot™ will be there to fly you through the process and ensure you receive a fair and deliverable GFE.
