The line item numbers on the good faith estimate should correspond woth with the item numbers on the Hud1 settlement statement you receive at closing.
Always be sure to get a copy of the good faith estimate before you proceed with the mortgage professional you have chosen.
Fees for some standard items, such as appraisal, credit report and title insurance should be almost the same at every lender. The same goes for payments to local governments, such as documentation stamps and recording fees.
A bank or mortgage company may be willing to drop some of the fees if you opt out of a service. For instance, they may overnight documents back and forth for faster approval. If you are not in a hurry, you can ask that the documents be sent by regular mail and the overnight charges be dropped.
Watch out for "junk fees" or additional charges. Most mortgage programs include them, but you should be able to negotiate them down or eliminate them.
It is designed to give you the ability to shop and compare the fees of one loan to the fees of the next, so you can make an informed decision based on the cost of the loan.
The GFE by itself is not the best way to compare loan programs. You will need to look at the TIL or Truth in Lending to make a good comparison of the different loan programs you are looking into. The TIL calculates the true cost of your loan because it factors in other fees along with the interest rate.
Required by federal law, a Good Faith Estimate (GFE) is a written list of the estimated closing costs associated with a mortgage transaction, including the lender's charges along with the local closing agent's charges and fees. It also includes estimated amounts for real estate property tax and homeowner's insurance.
Good faith estimate. A written estimate of expected closing costs that a lender must provide a prospective homebuyer within three days of the homeowner submitting a mortgage loan application. Brokers and lenders are required by law to make as accurate an estimate as they can.
The GFE is sometimes misused by loan originators. Some will deliberately under estimate the borrower's cost in order to make the sale. On the other hand some loan originators purposely over estimate the closing costs in order to make the borrower feel good about saving on closing costs.
A Good Faith Estimate (GFE) is just what it says it is. An estimate of settlement (closing) costs and this estimate is made in good faith. Estimates are not exact, as things can change between application and settlement (closing).
Making an estimate in good faith means that a Lender tries very hard to get the estimate of costs as close to the actual costs as possible. This does not mean the closing costs shown will be exact, but it should be close.
The TIL will show the APR (Annual Percentage Rate). The APR can be used to determine the overall cost of the loan to you, expressed as a yearly rate. The APR DOES NOT affect your monthly mortgage payment. Your monhtly payment is still a function of the interest rate, and the length of the loan. The APR can be useful when comparing the costs of two identical loan programs (two 30 year fixed rate loans), when the fees on the GFE differ slightly.
And please note that the GFE is only an estimate. It's an educated guess based on normal fees and escrow amounts and not meant to be exact to the penny. Although he better you broker, the closer your GFE will be to matching your HUD.
The GFE contains line items with item numbers corresponding to those on the HUD-1 Settlement Statement, which is given to the borrower at settlement. The HUD-1 Settlement Statement is an itemized list of the ACTUAL settlement cost, as opposed to the estimates on the Good Faith Estimate.
Good Faith Estimates vary by mortgage broker. When comparing, always ask for a TIL (Truth in Lending) which should break down the details of the mortgage loan they are offering. The GFE will vary because different lenders include different estimates and fees. When receiving a GFE, always ask for the matching TIL for that loan quote.