Question:

How can understanding the good faith estimate help a borrower?

Answer:

Understanding the good faith estimate will save you money in the first place. Instead of having to pay excessive fees at closing, this money can be applied toward your loan.

To better understand the good faith estimate, you should know about the different sections on the GFE. The 800 section Items payable in connection to the loan contains the following items, which account for most of the closing costs of the loan transaction.

  • Loan origination - this fee can vary from 1 to 3 percent.
  • Loan discount - these are the points you could buy to reduce the rate of the loan.
  • Appraisal Fee - $300 - $450 depends on the size, type and location of your property.
  • Credit Report - Varies from $20 to $50. Some lenders will waive this fee.
  • Lender's Inspection Fee
  • Mortgage Broker Fee - Be careful - some brokers may inflate this fee.
  • Tax Related Service Fee
  • Processing Fee
  • Underwriting Fee
  • Wire Transfer Fee

Understanding the good faith estimate fees and comparing several GFEs will help you avoid getting into an unfair agreement that will be difficult to break.

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