A good faith estimate, or GFE, is a document that is required by law to be provided to you by your mortgage broker or lender. It must be provided within three working days of the loan application and should include a list of all the estimated fees and costs associated with that loan. It should also identify which companies are expected to provide the services being paid for.
It is important for you to understand that the information provided is only an estimate. The final closing costs may be quite different. The GFE does not serve as a guarantee of closing costs, prepaids or interest rates. Some of the items that will be covered include appraisal fees, processing fees, title insurance and taxes.
The GFE is basically a draft of the HUD (Housing and Urban Development) statement, which is required by RESPA (Real Estate Settlement Procedures Act) to be made available to you at least one day prior to settlement of the loan. This allows time for it to be reviewed by all involved parties. The HUD statement provides an itemized list of all the incoming and outgoing funds for both the borrower and seller. It is an actual picture of the closing transaction, whereas the GFE is simply an estimate.
The GFE is intended to be used as a basis for comparison from different lenders or brokers. Charges and fees will differ from lender to lender, so it is vital to do your research and shop around. Get a few different quotes and don’t be afraid to bargain for the best prices.
When entering into negotiations, the essential sections you need to look at are the “items payable in connection with the loan” (lines 800-899) and the “title charges” (lines 1100-1199). The fees in section 800-899 can be negotiated with the lender or broker, while those in section 1100-1199 must be negotiated with the title company. Look closely at all the fees and establish what each fee is for, why it is being charged and whether it can be eliminated or reduced.
If you feel out of your depth in relation to the GFE, it may be an idea to consult a real estate attorney. They can ensure that all paperwork is correct and accurate, they can help you in negotiations and they can also ensure that you understand what is happening through each stage of the transaction.