Fill Out Your Good Faith Estimate Form

What is a Good Faith Estimate (GFE) and why do I need it?

A Good Faith Estimate (GFE) is a form provided by lenders to give you an idea of the costs associated with your loan. It includes estimates for settlement charges and loan terms if you are approved. This document helps you understand what you are getting into. By having the GFE in hand, you can compare different loan offers and make an informed decision. It is essential for shopping around, which can save you money in the long run.

What kind of charges are included in the GFE?

The GFE lists several key charges that you may incur when taking out a loan. These include origination charges for getting the loan, credit or points related to your chosen interest rate, and charges for required services such as title insurance and recording fees. It also covers estimates for homeowner’s insurance and daily interest charges up to the day of the settlement. Understanding these charges enables you to anticipate your overall expenses better.

Can the estimates on the GFE change by settlement time?

Yes, some charges can change by the time you reach settlement. For most cases, these charges can increase by up to 10%. However, your origination charge and certain other charges must remain the same unless you decide to use a different service provider than the ones identified in the GFE. It’s important to review the final HUD-1 form you receive at settlement to compare it against your GFE and ensure you understand any changes.

How can I use the GFE to compare offers from different lenders?

The GFE is designed to help you compare offers easily. Look at key components such as the loan amount, interest rate, and estimated settlement charges. Use the provided shopping chart to fill out details from different GFEs you receive. This straightforward comparison will help you find the most favorable terms. Remember, shopping around can lead to significant savings, so take your time in reviewing all your options.

Filling out the Good Faith Estimate (GFE) form is an important step for anyone seeking a mortgage. Mistakes in this process can lead to confusion and unexpected costs. Here are seven common errors people often make.

1. Not Understanding the Purpose of the GFE: The first mistake is failing to grasp what the GFE is designed for. Many borrowers think it's a final document, but it's only an estimate. Understanding that the GFE provides an approximation of expected costs can help you make better decisions.

2. Ignoring Important Dates: Missing deadlines can adversely affect your loan terms. The GFE states specific timelines for locking in interest rates and proceeding with settlements. Be sure to track these dates carefully to avoid missing out on favorable terms.

3. Not Comparing Offers: Borrowers sometimes forget to compare multiple GFEs from different lenders. Each lender may offer different rates and fees. Without comparisons, you may not realize you could have a better deal elsewhere.

4. Misunderstanding the Charge Components: Many people do not fully understand the charges outlined in the GFE. Each component, such as origination fees, title services, and insurance, plays a crucial role in the total cost. Lack of understanding can result in overspending.

5. Failing to Lock the Interest Rate: A common error is not locking in an interest rate when it is favorable. If rates rise before locking, you could end up with higher payments over the life of the loan. Timing is essential in this process.

6. Neglecting to Ask Questions: Many borrowers fill out the GFE form without asking important questions. If something is unclear, it is essential to seek clarification from the lender. Not doing so can lead to misunderstandings later on.

7. Overlooking Escrow Account Requirements: Finally, some borrowers are not aware of whether their loan requires an escrow account. This can affect monthly payment calculations. Being informed about the need for an escrow account can help you prepare better for the ongoing costs of homeownership.

Being diligent when filling out the GFE can save you time and money in the long run. Take the time to understand the form and ask for help when you need it. This approach can lead to a more favorable loan experience.

When pursuing a loan, understanding the associated documents is crucial. Alongside the Good Faith Estimate (GFE) form, several other documents can provide essential information about your loan terms and settlement charges. Familiarize yourself with these documents to make informed decisions.

• Loan Estimate (LE): This form provides a more detailed breakdown of loan terms, including interest rates, monthly payments, and estimated closing costs. It is delivered to borrowers within three business days of applying for a loan.
• Closing Disclosure (CD): Issued three days before a closing, this document outlines the final terms of the loan and the exact costs associated with the transaction. It compares the information initially provided in the Loan Estimate with the final terms.
• HUD-1 Settlement Statement: This is a document that lists all the actual costs and fees in the transaction as they occur at settlement. It allows borrowers to see precisely what they owe and what they’re receiving for their loan.
• Truth in Lending Disclosure (TIL): This form offers borrowers important details about the cost of borrowing, including the annual percentage rate (APR), finance charges, and payment schedule, helping to clarify the overall cost of the loan.
• Loan Application (Form 1003): Also known as the Uniform Residential Loan Application, this form gathers information regarding the borrower's financial situation, employment history, and the property being financed, which is essential for loan approval.

In conclusion, reviewing these documents in conjunction with the Good Faith Estimate will enhance your understanding of the loan process. Ensure you ask questions if any terms or figures are unclear. Being informed will help you secure the most beneficial loan for your needs.

• Loan Estimate (LE): Similar to the Good Faith Estimate, the Loan Estimate is a standardized form that provides borrowers with clear information about their mortgage terms and estimated charges. Both documents aim to help borrowers understand and compare mortgage offers, ensuring an informed decision.

• HUD-1 Settlement Statement: This document outlines the actual costs incurred at closing, contrasting with the Good Faith Estimate, which provides an estimate. While the GFE gives preliminary numbers, the HUD-1 provides final figures, allowing borrowers to verify their costs against initial estimates.

• Truth in Lending Disclosure (TIL): The TIL statement complements the GFE by detailing the costs associated with borrowing, including interest rates and terms. Both documents serve educational purposes, informing borrowers of their rights and the nature of their loan obligations.

• Closing Disclosure: Like the HUD-1, the Closing Disclosure provides a detailed breakdown of the final costs associated with closing a loan. The Closing Disclosure must be given to borrowers three days before closing, allowing them to compare these numbers with the Good Faith Estimate.

• Pre-Approval Letter: This letter indicates the loan amount a borrower may qualify for based on their financial profile. While the GFE estimates costs and terms, the pre-approval letter expresses the lender's willingness to grant a loan, helping borrowers understand their budget and options.

• Credit Report: A credit report provides a detailed account of a borrower’s credit history. This document is crucial in determining loan terms included in the Good Faith Estimate. Both documents assess the borrower’s creditworthiness, which plays a significant role in securing favorable loan conditions.

• Loan Commitment Letter: This document assures borrowers that a lender is ready to provide a loan under specific terms. The commitment letter is similar to the Good Faith Estimate in that it outlines loan details, confirming the lender’s commitment after initial underwriting processes.

• Memorandum of Understanding (MOU): An MOU can outline the borrower’s understanding of key loan terms. While not standardized, it serves a similar purpose to the Good Faith Estimate in confirming mutual understanding of the proposed loan terms before final agreement.

• Borrower Acknowledgment Form: This document signifies that borrowers understand their loan terms, resembling the GFE in its focus on transparency. Both documents play a role in ensuring that borrowers are aware of their financial commitments and associated risks.

Things You Should Do:

• Fill out all required information accurately, including your name, property address, and loan details.
• Use the shopping chart to compare offers from different lenders to find the best loan for you.
• Ask questions if you don't understand any part of the estimate or terms of the loan.
• Lock your interest rate as soon as you are comfortable to avoid changes that could increase your costs.

Things You Shouldn't Do:

• Leave any sections blank; this can lead to misunderstandings or delays.
• Ignore the importance of understanding settlement charges; they can vary significantly.
• Assume all lenders provide the same terms without comparing their offers.
• Wait too long to lock in your interest rate after you receive the estimate.

Misconceptions about the Good Faith Estimate (GFE) form can lead to confusion for borrowers. Here are seven common misunderstandings, clarified:

• The GFE is a binding contract. Many borrowers think that the GFE locks them into specific loan terms. In reality, it is merely an estimate of potential costs and terms. You can shop around and compare offers.
• The interest rate is guaranteed. Some individuals mistakenly believe that the interest rate presented in the GFE is set in stone. However, the rate is only guaranteed until you lock it in, which typically must happen before settlement.
• All fees are fixed and won't change. Borrowers often assume the fees listed won't change. However, certain charges may adjust based on which service providers you select or if the circumstances change before settlement.
• Your loan must have an escrow account. A common misconception is that all loans require an escrow account for paying taxes and insurance. This is not true, as some loans may allow you to pay those expenses directly.
• The GFE is the same for every lender. Many people believe that GFEs from different lenders are truly comparable. However, each lender may have different ways of calculating fees and terms, so direct comparisons are necessary to find the best deal.
• You cannot negotiate fees. Some borrowers think that the fees listed on the GFE are non-negotiable. In fact, many lenders are open to discussions about fees, particularly for settlement services.
• It is unnecessary to review the HUD-1 Settlement Statement. Finally, many borrowers overlook the importance of comparing the GFE with the HUD-1 Settlement Statement received at closing. The HUD-1 itemizes your actual costs and can reveal discrepancies from the GFE that need to be addressed.

Understanding these misconceptions can empower borrowers to make informed decisions when navigating the loan process.

When filling out and using the Good Faith Estimate (GFE) form, consider the following key takeaways to ensure a successful experience:

• Understand Your Estimates: The GFE provides an estimate of your settlement charges and loan terms. Pay close attention to these figures as they are critical for your decision-making process.
• Shop Around: Use the GFE to compare offers from multiple lenders. You should not settle for the first option; take time to evaluate different loans and their associated costs.
• Know Your Rate Lock Period: Be aware of the timelines related to locking your interest rate. This is crucial as changes can occur before the lock is established.
• Review Settlement Charges: Understand which charges can change at closing. These can be critical in determining your final costs, so comparing these with your HUD-1 form afterwards is advisable.
• Ask Questions: If there are parts of the GFE that you don’t understand or if specific information is missing, don’t hesitate to reach out for clarification. Your understanding is paramount before you proceed with any loan.