Question:

How to read a good faith estimate (GFE) to make the most of it?

Answer:

The GFE has to be provided within three working days of loan application.

You should be prepared and know how to read a good faith estimate (GFE) so that you could avoid lender junk fees. When lenders are being honest and disclose real fees, you should be able to read a good faith estimate (GFE) without much effort from your part. However, sometimes lenders may slip unnecessary fees, or fees undisclosed on the GFE may appear on the HUD-1 form.

To avoid those, you have to examine closely good faith estimates obtained with different lenders for the same mortgage type, amount and term and compare GFE sections line by line. Also, you should know that final closing costs stated on the GFE may vary significantly from the real closing costs on the HUD-1 statement. To avoid surprises, you may like to choose a lender who offered you a bottom line closing cost that you will never be made to exceed.

However, even lenders are having the best intentions, sometimes they cannot really know if property taxes and insurance will change and this may end up in frustration for the borrowers.

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