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The Good Faith Estimate Explained Simply and Concisely

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By : marco benavides    99 or more times read
There is really no great mystery to the Good Faith Estimate, and it can be simply and concisely explained. It is no more and no less than what your home mortgage lender believes you will have to pay when it comes time to close the loan. Where the Good Faith Estimate or GFE can become a bit complicated is that it may include several sections, items and letters, but it can all be easily understood.

The most vital thing to remember is that you are being given an estimate, and that this estimate can vary from the time it is handed to you to the loan closing. In that respect, the Mortgage Disclosure Improvement Act gives you seven business days to decide whether you want to go through with closing.

The mortgage loan cannot be closed during that waiting period, and you are given the right under the Act not to complete the mortgage loan agreement. Furthermore, when you receive your GFE, the lender is required to include explicit and conspicuous wording (meaning no fine print) which makes aware that you have no obligation to complete the agreement with the lender.

The form that you will receive is standard, and it will contain six basic categories, with each category detailing the costs that you will have to pay at closing. There is a number given to each of the six categories, with the first one being 800, and you will find that this is the section that details the loan fees or what you must pay the lender.

Fees paid in advance are detailed in section 900, and this is what must be paid in advance. Section 1000 includes the reserves that must be deposited with the lender such as assessment reserves, mortgage insurance premiums and the like. In section 1100, you will find title charges such as escrow fees, document preparation fees, etc. Section 1200 is for the government recording and transfer charges, which is simply what must be paid to the local and state government. Any additional settlement charges will go in section 1300, and these can be pest or termite inspection, survey costs, or any cost that arises that is not already covered in one of the other sections.

You have to go through the GFE line by line to know exactly what you are paying for, and you have to compare GFEs from different lenders to see where they vary and by how much. In this way, you can prepare yourself to negotiate any costs that may seem unreasonably high, especially if you find another lender who charges less.

This is especially important in section 800 because that is where you will find the highest fees, or what the lender is going to charge you in order to give you the mortgage loan. You can negotiate at any point during the home buying process, and you can do it with any person that is involved in the process. After all, you are the one who is going to have to pay back hundreds of thousands of dollars, so it is in your best interest to get the best terms that you can, and that includes the closing costs.
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