Making Your Good Faith Estimate Work for You
When looking to financing a new home, the first step you should take is getting a good faith estimate, or GFE. Making sense of a good faith estimate can be tricky, however. It is important to remember that your GFE is only an estimate. It is supposed to provide you with a way to compare different loan options in an efficient and convenient manner so you can be prepared. The specifics may change slightly once you agree to the terms of a loan, so a GFE only acts as a general overview.
How Do You Receive a GFE?
A good faith estimate is provided when you apply for a loan. There are exactly six pieces of information required to receive a GFE: your name and social security number, the home’s address and estimated value, your income, and the size of your loan. Nothing else is required of you, which also means you are never committed to the loan and you do not even need to submit a full loan application. Legally, the lender must provide you with a GFE within three business days of receiving your information.
What Should You Do Next?
Once you have your good faith estimate, it is time to use the information to make a decision. The GFE is a comprehensive list of all expenses and fees associated with your loan, including the monthly payments you will make. The costs can be broken into the following categories:
- Loan Fees
- Title Charges
- Government Charges
- Advance Fees
- Additional Charges
Remember that the costs detailed in your GFE are only required to be guaranteed by the lender for 10 days following your application. The interest rates are sometimes not guaranteed for the full 10 days, so you should prioritize making a quick decision.
Making sense of a good faith estimate can be difficult, but it is a vital skill if you are considering buying a new home. It can be your best tool to ensure you enter into a beneficial loan agreement.