Mortgage 101: What is a Good Faith Estimate (GFE)?

A Good Faith Estimate (GFE) is an official document provided by a mortgage lender detailing the estimated costs associated with a loan. After you apply for a loan, the lender is required to provide you with a GFE within three business days of the receipt of your application. The GFE can be a great tool to help you understand the cost of the loan, compare offers, and make an informed decision.

What a GFE tells you

A GFE lists basic information about the terms of the loan and an estimate of your settlement charges. A summary of your loan, including the initial loan amount, loan terms, initial monthly payment, and if your interest rate and loan balance can rise, is listed on the GFE. If applicable, the GFE will also include Information about your escrow account. An escrow account is used to cover taxes and insurance. Also listed on the GFE is a summary of your settlement charges, which is the estimated amount you’ll need to pay at closing. Here’s a list of some of the settlement charges you’ll find on your GFE:

A fee for obtaining a credit report
A Loan origination fee – the amount the lender charges for processing loan paperwork
Legal fees
Charges for home inspections
Appraisal fee
Survey fee – the cost to verify property lines
Title insurance – this protects the lender if the title isn’t clean
Title search fee – the cost for a background check on the title to make sure there aren’t unpaid mortgages or tax liens on the property
An escrow deposit
A recording fee – The cost to record the transaction in the city or county’s records
Underwriting fee – covers the cost of evaluating the loan application

When it can and cannot change

Some of the costs on the GFE can change at settlement, but others cannot.

The following items listed on the GFE cannot increase at closing:

The origination fee
If your interest rate is locked, the credit or charge (points) for the specific interest rate chosen
If your interest rate is locked, your adjusted origination charges
Transfer taxes

The following items listed on the GFE can increase by up to 10% at closing:

Required services for which your lender chooses the provider (e.g. credit reports, appraisals, and tax services)
Title services and lender’s title insurance charges (if you use a company identified by your lender)
Owner’s title insurance (if you use a company identified by your lender)
Required services that you can shop for on your own (if you use a company identified by your lender)
Government recording charges

The following items listed on the GFE can change at closing:

Charges for any services you obtain from a company not listed by your lender
Title services, lender’s title insurance and owner’s title insurance ( if you don’t use a company identified by your lender)
Initial deposit for your escrow account
Daily interest charges
Homeowner’s insurance