Question:

Do I need a home loan good faith estimate?

Answer:

Yes. A home loan good faith estimate (GFE) is the lenders' initial disclosure of closing costs related with the establishment of the loan. The lender is required by the Real Estate Settlement Procedures Act, RESPA, to disclose loan related closing costs to a potential borrower within three days of receiving a loan application.

Sometimes lenders will try to twist numbers a little bit on the home loan good faith estimate, which will not necessarily happen if you ask for credentials and reviews on that lender online or through third party sources. You may like to deal with lenders with good reputation on their GFEs.

Often, though, lenders' HUD-1 statement will contain higher numbers than the GFE presented to you. The GFE does not represent legal binding and HUD-1 numbers are expected to be a little higher than initially stated, but if the HUD-1 stated overall closing cost exceeds the home loan good faith estimate with 12% or more, you'd better ask the lender to explain it line by line. There are fees that the lender can't quite control - as property taxes, or attorney fee, but significantly higher costs on the home loan good faith estimate rings a bell.

Unlike the GFE, the HUD-1 statement when signed represents a binding agreement that is difficult to back off on.

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