Financial Facts: Understanding the good faith estimate
January 26, 2013
Every mortgage that is closed has one item in common with all the other mortgages that are closed, that being a good faith estimate. This is a standardized form that all borrowers receive to view all the known costs associated with the mortgage.
The forms may differ a bit from one computerized mortgage program to the next, but all should have a full list of all the estimated costs the borrower will pay at the closing table.
On this form we can see the names of all the borrowers and the mortgage program that they have chosen. It will also have the purchase price, the amount of the requested mortgage and the all important interest rate.
Then the detail starts with the fees on the loan.
The fees are generally the appraisal fee and the mortgage investor fees. The dollar amount will vary from appraiser to appraiser and investor to investor, but these are fees that should appear on all estimates.
Then we move on to any escrows that are being collected on behalf of the borrower. Escrows are items such as real estate taxes and home owners insurance. The mortgage investor may collect these and then pay the bills for the borrower when they come due.
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Title insurance fees are next. These cover the work by the title company to insure that the buyer is obtaining a property with no liens other than the ones they place on the property. The title company also files the necessary documents with the county for public record and makes sure the lenders’ documents are properly signed.
Now comes the various other fees that can be very specific to the property itself. These are items such as local transfer taxes and home owners association fees. Please keep in mind that I do not make up these fees, but the fees are set by the developer, municipality or home owners association.
At the bottom on the good faith estimate is the estimated dollar figure that the borrower will need to bring to the closing. The final figure, down to the penny, is derived at by the title company. And hopefully this is available to the borrower a day or two prior to the actual time and date of the closing.
A word of caution to all borrowers, note that in the title of this article is the word estimate. I estimate all the known fees and this is based on my experience in this marketplace. Some mortgage lenders conveniently underestimate some of the fees to make their good faith estimate look a bit cheaper than other lenders’ estimates. Remember, the fees are the fees and just because one lender may show a lower title fee, as and example, they do not set those fees. So if one GFE is lower than all the others, beware. Make a call to the mortgage lender and verify that the figures are close to the actual figures, not some dollar amount pulled out of the sky to make their GFE look a bit lower, as you will pay the correct amount at the closing and it is too late to cancel the deal with that lender.
For answers to your mortgage related questions call Bob Kieber at (970) 453-4700 or email him at firstname.lastname@example.org. Bob is a local mortgage lender with Centennial Bank. He has 30-plus years of professional experience in real estate, finance and investments, and is a longtime resident of the High Country. Member FDIC, Equal Housing Lender. NMLS Bank #401640 Broker #289610. For tax benefit information please consult with a professional tax advisor. The opinions expressed are those of the individual, and do not necessarily reflect those of Centennial Bank.