Question:

What is required under the Good Faith Estimate by law?

Answer:

The Good Faith Estimate by law is required to disclose as many mortgage closing cost fees as possible. The Good Faith Estimate (GFE) is obligatory to lenders according to the Real Estate Settlement Procedures Act (RESPA).

Brokers and lenders are required to provide a GFE by federal regulations, but there are no penalties if inaccuracy occurs. Also, at the time of issuing the good faith estimate the lender will not be aware how much exactly would title insurance cost, or house appraisal, or fees imposed by other entities working on the loan. Therefore, the costs listed on a GFE and the final closing costs may differ in hundreds, as well as in thousands.

From the Department of Housing and Urban Development (HUD) have proposed that lenders use a bottom line closing cost in their good faith estimates. This will be a binding cost and will save hundreds to borrowers. However, even with this kind of a Good Faith Estimate some costs as the homeowners insurance and property taxes cannot be calculated precisely before closing.

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