Buying a home can be very confusing and not to mention the new terms you need to know. This is especially true when it comes to navigating the mortgage process. One important term to understand is the Good Faith Estimate.
The Good Faith Estimate or GFE is a government-mandated form mortgage brokers and lenders are required to give prospective borrowers within three days of a loan application. The GFE summarizes the terms of the loan. It can be used to compare loan offers from the same or different lenders. An approximation of the final figure of the loan costs are on the GFE and must be as accurate as possible, it is important to note that some GFE can have a 10 percent tolerance.
The top two sections on Page 1 provide a summary of the loan terms and estimated settlement charges. There is also a section the covers when the GFE expires and whether the interest rate is locked or floating.
You will want to go over the GFE closely; it will disclose the initial loan amount, interest rate, monthly payment and loan terms. Remember that the payment includes principal, interest and mortgage insurance, if any, but not property taxes or homeowners insurance.
You can find a Guide To The Good Faith Estimate by clicking here.