Good Faith Estimate
Related Terms: GFE, Closing, Loan Estimate, Closing Disclosure Form
The Good Faith Estimate (also known as a GFE) is a document that offers potential homebuyers basic information about their home loan, with an estimate of the costs that go into acquiring one. This form gives a breakdown of information about the mortgage, such as the interest rate, loan term, and principal balance, which allows borrowers to compare costs and shop for the best option.
As of October 3, 2015, people applying for a home loan are given the “Loan Estimate” and “Closing Disclosure Form” in place of the GFE. Those who have applied for a loan before said date, or borrowers with a reverse mortgage, will receive the Good Faith Estimate.
The GFE, which must be given to you within three days of the submission of the loan application, lists estimates of loan fees, escrow paid to third parties, charges for change of title, and taxes. It also discloses whether there is a rate lock, in which case you have a set amount of time to close on the property in order to avail the agreed upon interest rate.
By understanding the costs listed in the Good Faith Estimate, you will be able to make better financial decisions for yourself and hold lenders accountable for the terms they offer.
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