A Good Faith Estimate

  • February 06, 2015

When you apply for a mortgage, your lender is required to give you a “Good Faith Estimate” or “GFE” within three days. What is a Good Faith Estimate and why is it important?
 
The GFE is an estimate of your costs to obtain the mortgage, as well as other important information about your loan. The GFE is important for two reasons:
 
·  It discloses all of the fees, so there won’t be any surprises at loan closing.
 
·  It helps you make an apples-to-apples comparison of the mortgage offers from different lenders.
 
Let’s take a closer look at what you’ll learn inside your Good Faith Estimate:
 
·  Loan terms: including the amount you’re borrowing, initial interest rate and your estimated monthly principal and interest payment. (Your actual payment will likely be higher, because it will need to also include homeowner’s insurance and property taxes.)
 
·  Estimated monthly escrow payment: which includes homeowner’s insurance and property taxes. Combined with your principal and interest payment, this will add up to and estimate your total monthly mortgage payment.
 
·  Estimated closing costs: the cash you’ll need to have on hand at closing. This includes the fees to originate your loan and down payment, less credits you may have for an initial deposit and/or other sources.
 
·  Itemization of fees: which includes the costs to originate the loan (such as origination/discount points, application fee and underwriting fee), prepaid interest, initial escrow payment, property appraisal, credit report, title search, title insurance and other fees, as applicable.
 
·  Your total interest cost: The amount of interest you’ll pay over the life of the loan, when you make monthly payments over the full term. If you make extra principal and interest payments, or pay off the mortgage early because you’re refinancing or selling your home, your total interest cost will be less.
 
·  Your Annual Percentage Rate (APR): representing the total cost of obtaining your mortgage, after all the fees are included. The APR is an excellent way to compare the total costs from lender to lender. It’s important to keep in mind that your APR is NOT your interest rate.

Latest Tweets

© CMG Financial, All Rights Reserved. CMG Financial is a registered trade name of CMG Mortgage, Inc., NMLS ID #1820 in most, but not all states. CMG Mortgage, Inc. is an equal opportunity lender with corporate office located at 3160 Crow Canyon Road, Suite 400, San Ramon, CA 94583 888-264-4663. Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act No. 4150025; AK #AK1820; AZ #0903132; Colorado regulated by the Division of Real Estate; Georgia Residential Mortgage Licensee #15438; Illinois Residential Mortgage Licensee; Kansas Licensed Mortgage Company #MC.0001160; Massachusetts Mortgage Lender License #MC1820 and Mortgage Broker License #MC1820; Mississippi Licensed Mortgage Company Licensed by the Mississippi Department of Banking and Consumer Finance; Licensed by the New Hampshire Banking Department; Licensed by the NJ Department of Banking and Insurance; Licensed Mortgage Banker – NYS Department of Financial Services; Ohio Mortgage Broker Act Mortgage Banker Exemption #MBMB.850204.000; Licensed by the Oregon Division of Financial Regulation #ML-3000; Rhode Island Licensed Lender #20142986LL; and Licensed by the Virginia State Corporation Commission #MC-5521. CMG Mortgage, Inc. is licensed in all 50 states and the District of Columbia. Offer of credit is subject to credit approval. For information about our company, please visit us at www.cmgfi.com. To verify our complete list of state licenses, please visit www.cmgfi.com/corporate/licensing and NMLS Consumer Access (www.nmlsconsumeraccess.org).