Question:

How to compare good faith estimates?

Answer:

To compare good faith estimates, you first have to collect different GFEs from different lending institutions - a bank and a private lender, for example. You need to have decided on the type and term of mortgage you will be taking - an ARM or an FRM; for 15, 20 or 30 years. Now, having settled this, you could ask for good faith estimates and compare them line by line.

The 800 section of the good faith estimates is where most lender negotiable fees will be listed. The Items Payable In Connection With Loan section includes the items that most influence the upfront fees related to the loan. The loan origination fee 801, the loan discount fee 802, and the mortgage broker fee 808 may be the items that require greatest attention.

The 900 section of the good faith estimates basically contains the items to be deposited in the escrow account. These are the items that cannot be predicted with great certainty and will account for possible great difference between a GFE and a final HUD-1 form.

Sections 1000 to 1300 include the items that either can't be negotiated, or do not have significant effect on the overall loan costs.

To make the best of a good faith estimates comparison, compare items in the 800 section and ask the lender for bottom-line cost on the 900 items. That is, the lender assumes items in the 900 section to cost you as much as $800, but no more than $1000. If it turns out that taxes and insurance amount to $1800, but the lender has set a bottom line cost of $1000, they can't ask you to pay more.

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