Anyone who applies for a mortgage is required by the government to receive a “good faith estimate” (GFE) from the lender within three days after filling out the application. This is a document that will list all of the fees that will come along with the mortgage. It is wise to first take and study this document thoroughly before accepting the mortgage.
Many struggling homeowners who are having mortgage problems today, claim that they never did receive their GFE from their mortgage brokers or lenders in the prescribed time period by law. It is imperative that you demand everything that is quoted to you verbally is also put in writing. Please keep in mind that this is just an “estimate” and these terms can change, but your loan office is required to reissue a new Good Faith Estimate specifying the new changed terms.
The GFE is very important and helpful because it clearly allows you to compare the total costs of competing offers. But this document may be very difficult for some people to understand, especially if different lenders happen to list different fees on the report. so therefore it is extremely important you take you time and carefully study this agreement.
Below are just a few things you should look for:
-Lender fees: Lenders generally have a long list of fees that come along with a mortgage. These fees include the credit report fee, application fee, appraisal fee, broker fee, and possibly even rate lock-in fees. Be very wary if one lenders fee is much higher than another, all lender fees should be in the same range.
-Points and interest rate: This document will clearly show the interest rate you will be paying and any other discount points you may be paying at the time of closing. If you pay discount points be aware that you will most likely have a lower rate and monthly payment.
-Home insurance: The good faith estimate may give a figure for hazard or home insurance, but be aware that this may be more expensive than if you were to get your own homeowners insurance.
-Fees may rise higher: It is crucial that you remember that this statement is only an estimate, that is why it is called good faith estimate. By closing day, you may notice a major difference in the figures that were originally quoted in this document. You want to watch out for this before closing the deal. This has caused many homeowners around the US to lose their homes because they were under false impressions.
These are only some of the aspects the GFE will cover. Also remember that this document is not completely accurate to the amount you will pay. Some reasons why include additional closing costs, investor charges, attorney fees, and other charges that the lender may have not been able to give an accurate estimate on.
Here is some information from HUD on some new chages:
“On January 1, 2010, HUD will require that lenders and mortgage brokers provide consumers with a standard Good Faith Estimate (GFE) that clearly discloses key loan terms and closing costs. HUD estimates its new regulation will save consumers nearly $700 at the closing table. Closing agents will also be required to provide borrowers a new HUD-1 settlement statement that clearly compares consumers’ final and estimated costs. By promoting comparison shopping, HUD’s final RESPA regulation is estimated to save consumers an average of nearly $700.”