A Good Faith Estimate is an important document for homebuyers in the process. This document, from the lender, gives homebuyers a detailed look at the finical obligation they are taking on by accepting the mortgage loan. This document outlines all costs and payments that the buyer will be subject to post closing. These costs include loan fees, advance fees, reserves/escrow charges, title charges, government charges, and all other charges associated with the mortgage loan. This is a helpful tool in the home buying process because it makes it easier to compare and contrast lenders when shopping around for a mortgage. Homebuyers should leverage this tool by requesting a GFE from at least a few different lenders in an effort to find a loan that suits your finances best.
Receiving a GFE estimate is simple and easy. Lenders are required by law to either mail or hand deliver a GFE estimate to a homebuyer by the end of the third business day after a loan application is submitted. The GFE outlines a series of costs that are associated with closing. Here’s a breakdown of some of those costs:
Application Fee: Cost to apply for a loan. In some cases, this includes costs associated with a credit check and verification.
Appraisal: Cost to get home appraised to confirm the fair market value and is close to the listing price.
Attorney Fee: All associated attorney’s fees to review legal documents and agreements in the transaction.
Credit Report: A Tri-merge credit report is pulled to get your credit history and score. Your credit score plays a big role in determining the interest rate you’ll get on your loan.
Loan Discount Points: “Points” are prepaid interest. One point is one percent of your loan amount. This is a lump sum payment that lowers your monthly payment for the life of your loan.
Origination Fee: This covers the lender’s administrative costs. It’s usually about 1 percent of the total loan but you can sometimes find mortgages with no origination fee.
Escrow Deposit: Lender’s often require homebuyers to pay two months of property tax and mortgage insurance payments at closing. This is deposited into an escrow account.
Flood Determination: Cost to determine whether the home you are buying is in a flood zone. If the home is in a flood zone, you’ll have to pay flood insurance.
Prepaid Interest: Most lenders will ask you to prepay any interest that will accrue between closing and the date of your first mortgage payment.
Survey Fee: This fee goes to a survey company to verify all property lines and things like shared fences on the property. This is not required in all states.
For more information on all your real estate needs call us at 718.816.7799 or email info@CasandraProperties.com.