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Home » What is a Good Faith Estimate?

What is a Good Faith Estimate?

October 28, 2016 by admin Leave a Comment

The term “Good Faith Estimate” has been used in mortgage financing up until October 3, 2015 or if you’re applying for a reverse mortgage. This is the estimated cost of the mortgage loan and provide you with information about the loan so that you can compare offers, understand the real cost and make informed decisions however, a new rule about mortgage closing went into effect last year, 2015 brought on by the Consumer Financial Protection Bureau aiming to simplify loan disclosures and help borrowers better understand their mortgage terms. Good faith estimates are fine but they can get very confusing and can often change by the time you actually close on the loan. These new loan estimates are less likely to change and create last-minute drama.What is a Good Faith Estimate?

Within three days of providing basic information to your lender you should receive a loan estimate. This will detail your loan an answer clear questions about whether an amount can increase after closing, whether or not your loan includes a prepayment penalty or balloon payment and all the expenses included in the escrow amount.

The loan estimate will also include a projected monthly mortgage payment, property taxes, insurance and any other assessments. The estimate will include the amount of cash you’ll need to have on hand at settlement or “closing”. The estimate will also include items and services that you can and cannot get different offers are including pest inspections, appraisals and survey fees.

The new “Loan Estimate” is also known as “Know Before You Owe”. This is a great way to compare different offers through different lenders and have a very tried-and-true, clear-cut figure on all of the factors involved in getting a mortgage.

The Loan Estimate will include the following:

  • Identifying information and important dates
  • Loan terms including the loan amount, interest rate, principle, interest rates and any disclosure on prepayment penalties, adjustable rate mortgage information or a balloon payment.
  • Projected payments, which includes a monthly breakdown of your principal and interest including any mortgage insurance, property taxes and homeowners insurance. (This will also have information on whether or not the taxes and insurance will be included in the monthly payment.
  • Final closing costs, which will include all the loan fees, lender credits, points and the cash that you’ll need to bring to the closing table.
  • Miscellaneous fees including appraisal and credit report fees, government recording fees, prepaid taxes, escrow and title insurance fees and any reserves.

The bottom line of your loan estimate will include all total closing costs, including your down payment, funds that you apply, any debits and credits, deposits and seller credits.

What can you do with this loan estimate?

Just because this loan estimate gives you a really good idea of what you’ll be paying, it doesn’t mean that it’s the end all and that you can’t shop around. This loan estimate gives you great ammunition to compare other rates, credit unions, banks and lenders. You want to compare the annual percentage rate, interest rates, fees and points to determine the best situation for your needs. As a lender, it is my responsibility to be as upfront, honest and open as possible. It is required that I inform you of any intentions to pass your loan off to a different servicer after closing, which is a very common procedure.

For more information contact us today! We’d love to help get you started on the process and find the right home that meets your needs.

Filed Under: Buyers Tagged With: buying, good faith estimate

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“Life will lead you to where you belong. Five years ago life led me to meeting Karen Baker at an...
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“Life will lead you to where you belong. Five years ago life led me to meeting Karen Baker at an Open House. Our relationship continues as Karen and her husband Frank have been outstanding not only in helping my husband and I find the right retirement relocation home, but we have watched their commitment in helping many others find their homes. She and Frank treat every client as if they are the only ones that exist. They provide thorough research of areas and homes of interest and present you with the options. They are not your typical hard sell, must-buy-now realtors. They are here to help you find your next home?. You won’t go wrong with the Bakers!
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Amy and I have bought and sold four properties in the past twelve years. Both of you are the best...
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Amy and I have bought and sold four properties in the past twelve years. Both of you are the best realtors we have ever dealt with. Amy and I both felt we could trust you to look out for our interest. The level of service you provided was outstanding, from taking the trash out, helping the buyer with inspecting the irrigation system, dealing with our tenants, always being there if we needed to ask a question, providing constant updates on the market and always keeping us informed on the sale of our house. I think your next venture should be training other realtors, because both of you have mastered the art of providing excellent service. I will be sure to recommend the Frank and Karen team to anybody looking for a trust worthy, knowledgeable and top performing realtor. It was a pleasure working with both of you.”
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“Karen & Frank Baker are the best. They are very knowledgeable with the area & showed us many homes. When we made up our minds which one we wanted, they got us the best deal on it. We were very satisfided with them. After the purchased was made & we moved in, they were still there to answer any questions or problems that we might of had. Like I said, they are the BEST.”
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