This is Part 1 in a series of guest posts about Good Faith Estimates by Kyle Pugel. Kyle is a mortgage advisor at Coldwell Banker Home Loans, who promises to do whatever it takes to ensure that one of the biggest and most important purchases you’ll ever make will also be one of your easiest. His specialties include reviewing your home loan needs with you as well as suggesting the best financing options to meet those needs.
Clients usually ask two questions right off the bat when they talk to lenders: “What’s the interest rate?” followed by “How much is that going to cost me?” The first question is pretty straightforward but the second can be a bit more complicated to answer. There are several closing costs associated with financing a home and they can vary from lender to lender.
Within three days of completing of a loan application, lenders are required to provide a Good Faith Estimate (GFE) to prospective borrowers. This is a standardized form used by lenders to help borrowers determine the costs they’ll have to pay at Close of Escrow as a result of obtaining a mortgage loan.
The GFE has all of those costs broken down into three categories.
Good Faith Estimate
1. Charges that cannot increase (e.g., loan origination charges, points paid for a specific interest rate, adjusted origination charges, and transfer taxes)
2. Charges that can increase up to 10% (e.g., required services selected by the lender, title insurance and services, and government recording charges)
3. Charges that can change (e.g., required services that clients can shop for, such as homeowner’s insurance, and daily interest charges)
If you add all of these charges together with your down payment, you’ll have the most accurate estimate of “how much this is going to cost” you at Close of Escrow.
Please check back here for future installments of this series, during which we’ll discuss the three categories of the Good Faith Estimate in greater detail and how much you should expect most of the charges from those categories to cost.
“The Importance of a Good Faith Estimate” is an ongoing series of articles, so if you’d like to read on, click over to “The Importance of a Good Faith Estimate – Part 2.”
Image Credit: Bill David Brooks on Flickr. CC Licensed.