How To Read The Good Faith Estimate
This is the 2nd in a series of 3 videos produced by Housing and Urban Development (HUD). The subject of this video is shopping for your loan and explains the Good Faith Estimate (GFE) in detail. The first video discusses the process of buying a home, while the third video deals with closing the transaction.
For your reference here is a copy of the Good Faith Estimate or GFE.
The video will walk you through the Good Faith Estimate Form and explain what items are most important. The GFE is required by law to be given to your shortly after applying with the lender for a home loan.
The Good Faith Estimate will help you compare various lenders costs, estimate of real estate loan costs, and the all important interest rate on the loan. It is important to understand that the good faith estimate is not a complete estimate of all the money you need to close your escrow, but of the loan affiliated costs.
Be sure to take your good faith estimate to the escrow closing to compare costs. The estimate cannot exceed 10% for certain costs. Some of the important components of the good faith estimate include:
- Tolerance Charts – how much the estimates can vary.
- Trade off table, higher interest rate for less closing costs.
- Shopping chart to compare the various lenders.
I normally recommend that Clients speak to 2 or 3 lenders. I usually give recommendations based on loan type, amount, and how the clients personality. If you are going to be offering on bank owned properties (REO) you should talk to at least one manor direct lender to loan approval.
If you would like to view and download the HUD Shopping For Your Home Loan booklet. This is the same booklet that your lender will provide to you.
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