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Good Faith Estimate -- What to look for when shopping......

good faith estimate

When shopping for a mortgage, the general consumer can get very confused at times. Even if you have bought or refinanced several times in the past, it can still be confusing.

It doesn't matter if you are applying for a FHA, conventional, VA, or subprime mortgage. The Good Faith Estimate (GFE) is very critical when shopping for a mortgage. But you have to be careful because more than 75% of this piece of paper is an estimate. Some loan officers will cut corners just to make their total estimate look cheaper.

Three things that you want to look for when you first look at your GFE.

Look at the loan program and make sure this is the program that you want. If it was an adjustable, it would say differently. (Yellow highlight -- Upper right hand corner)
Look at the rate. Make sure this is what you discussed when speaking to your loan officer. (Up top, middle of page, yellow highlight)
The 3rd issue are the fees. Everything in section 801 to 820 would be the lenders fees or anything the lender is going to charge you. Don't ever be fooled if one lenders fee is higher than the other. You still need to compare the rate. You also need to speak to your accountant to find out what can be written off. (left hand column with 10 to 15 highlighted items)

Usually just the points can be written off. And some lenders make their good faiths seem like there are no fees, but they will put a charge on line 808, the mortgage broker fee. This might be a fee to pay down your rate some. But they aren't do you a service because this fee can be written off on your tax returns the following year. Overall, you need to compare apples to apples.

Conclusion : Again, don't always shop and ask for total fees. Compare the lenders fees the most. In the state of New Jersey, the clients taxes are escrowed every quarter. That means that your taxes are paid every 3 months. But generally you will be reimbursing the seller in regards to the taxes that were already paid for in advance and what the lender will need to escrow. This usually comes out to 4 months that would need to be collected. Know your states requirements. I was being compared to another lender who only put 3 months down. He also lowered the title insurance by $300. It's very easy for a loan officer to say at closing, "these aren't my fees, so all I can do is give an estimate." Word of advice, yes, it's an estimate. But if they have been doing this for sometime, they should have a good idea of these other fees. Also, if they don't know, they should be asking the title company or someone else. Lastly, just be careful, because some of these figures are not worth the paper that they are written on. It's just that, an estimate based on good faith. Make sure that you always speak with a Mortgage Professional. Just be careful not to shop that yourself right out of the market.

Lastly, if you have 3 good faith estimates in front of you, always go back to the person that you had the best feeling with, that you are comfortable the most with, and share the other 2 with them. Just don't run to the person with the best rate and or fees. I always like my clients to come back to me no matter what. I might be able to point something out to them. And this topic must be discussed when receiving a GFE, otherwise this GFE doesn't mean squat. Mortgage Rates -- Locking or Floating -- Part 2 of 2

Reminder : Don't always compare the APR also. I am writing a post on this tomorrow. And keep in mind, rates change daily. Don't take a week to shop. And if someone takes more than a half a day to get you a good faith estimate, this might be a red flag. If I am not really busy, it would take me a few hours. If I am really busy, less than 24 hours. If it takes a few days, run, don't walk from this individual.

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Posted by Jeff Belonger -- The FHA Expert.com -- FHA Loans -- FHA mortgages - USDA loans on 08/31/2007 11:42 PM

Comments (26)

gfe, good faithe estimate, mortgage, mortgage shopping, mortgage loans, real estate, fha, 100 percent financing, bad credit

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26 Comments on Good Faith Estimate -- What to look for when shopping......

AUG

2007

the funny thing is I try to bring my estimates in a little high for my clients so that they come in with less money. I typically will lower my fee if I come in over since I try to guarantee my fees. Good post though.

Thank you, thank you, thank you for this blog. I love the ease of information and would love to share it with my clients! Thanks again!

SEP

2007

Rick.... I also bring my estimates in a little higher. I agree, about bringing less money. My whole point are those that cut corners and make fees a little less, when it's not their fee to begin with, trying to make the whole picture look cheaper.

Lowering your fees? Rate and fees go hand and hand. You can always lower the rate also. One pays for the other when it's all said and down. thanks for your feedback and for the compliment.

Dawn.... my pleasure. Sorry that the GFE came out a little blurry, but the average consumer should get an idea of this.

Jeff, I'm bookmarking this one so I can share it with my buyers. You explained the GFE so well, I don't have to -- just print out this post and include it in my buyer packet, with your permission, of course.

Good work amigo. "Lastly, if you have 3 good faith estimates in front of you, always go back to the person that you had the best feeling with, that you are comfortable the most with, and share the other 2 with them.." Well put Jeff! This kind of stuff is ultra-important for the customer to comprehend. You laid it out well here.

Jeff - this is good advice for all potential homebuyers. I've seen so many people think that they can just shop rates and get the best deal, and they don't even look into the most important number - APR. The mortgage broker that I work with is like you, in that he is happy to take a look at what the competition has to offer and just wants to chance to beat it or match it before the homeowner makes a final decision. That's all that one can ask for. I hope that a lot of consumers read this before they start their shopping.

Jeff, this is wonderful advice to not only first time home buyers but seasoned buyers as well. Some lenders are getting a bit "creative" with the GFE's. (Flat rate instead of a breakdown in closing costs.) The one bit of advice I give to buyers is to make sure they are comparing apples to apples.

Jeff, I only learned to read a GFE the last few years, it does make a difference especially if you are shopping. I love the idea to lay all 3 out in front of you to comparing apples to apples.

Now that's what I am talking about ... that is the document I tell my clients/customers to get in writing and review or i offer to review. The ole' Good Faith Estimate is part of my dialogue with each buyer I talk too and represent. I've seen one too many not listen and then all those "extra" fees show up and your questioning them at a closing table.

GET IT IN WRITING UP FRONT!!! Lets hope the public follows your advise. Have a great holiday weekend!

Jeff,

I may want to steal this and put it on my website. I will talk to you later.

Jeff...Excellent! May I share it with some of my students?

Thanks for a great post. I will use the tips when I talk to buyers. I had a buyer who recd a rate with 3 points and the amount was not mentioned in GFE .The loan officer said it is only an estimate. I had to explain, that the buyer did not have money for the 3 points.

Jeff,

Sadly these GFE's are everywhere, I think this is a great expalnation on what to look for... Man I have seen some horrible GFE's before, Nice Post!!

Tom Weiss

Too everyone that wants to copy this and put it in their buyer's package, I have no problem as long as my name is on it and that I am given credit. thanks to everyone asking...

Judi.... as stated above, yes, you have my permission. Thanks for the compliment.

Jason...... I have had several clients in the past that I know had a good feeling about me, but never came back for some reason or another. And 9 out of 10 times, they didn't get a good deal after all said and done. Some loan officers are just great sales people and their job is to get that person in the door. ..at all costs. You know the deal. Thanks for the compliment.

Adam..... APR is next, maybe tomorrow. APR can still be misleading. I still think the good faith estimate is the best way to shop, as long as it is all done in the same day or within a few days. RATES can change daily. And yes, I hope some people read this before they shop.... thanks

Kris.... flat rate with no fees is easy to show. But is it a better deal? Don't know until I reveal the spread between both rates and both payments. And goals, depending on how long you are going to be in the house. Thanks for the polite compliment.

Missy.... apples to apples. This doesn't happen enough. And as someone else mentioned, some loan officers are just creative when showing a good faith estimate. And they might make you feel like one fee might be larger than their's is a bad thing, not good. And keep your mind on this, but not the whole picture.

Desiree...... what's sad is when I speak to a potential client, they sometimes don't know their rate or payment, because the lender didn't offer it. Just told them that they are qualified for x,y,z. And I just got off the phone with a potential client that has talked to two loan officers, that he is shopping rate and costs, but doesn't have a good faith estimate from anyone as of yet. hhhhhmmmmmm Are they hiding someone? Fearful of being shopped?

As you stated, at least get something in writing upfront. Sure, sometimes it's not worth the paper that it's written on. But it's a start. Thanks for the enthusiasm.

Tom B. ..... you have my number... call me anytime. I just added a few sentences to this... the reminder is one of them. thanks

Monika..... yes you may. Thanks for asking, but I tell everyone, they don't need to ask... as long as I get credit. Thanks again and for the polite compliment.

Gita...... that's sad... basically the old theory of, I told you, don't you remember. And if someone doesn't have the money, then why even offer it? Some loan officers don't ask the right questions sometimes. Thanks for the kind words.

Tom W. ....... yes, I have seen some bad ones also. I love the ones that have scribble and cross outs on them. What is that all about? lol

I'll be interested to see what you say about APR, but that is a good indication of what you should pay close attention, because it does factor in the origination fees for the loan as well as the interest rate. I know simplistic, but it basically is what it costs you every year for that loan.

Jeff - Best bet is to work with someone like yourself who can explain the differences in the GFE's. They are just plain confusing to the layperson. We actually have a separate CA GFE that spells out the monthly payments, too that is a help in comparing loan payments, but not much help in actually comparing costs...just an extra layer of confusion!

Jeff - Thanks for the breakdown - I am always telling my clients not to compare just the rate!

Jeff,

Great post. One of my pet peeves is when people shop for a mortgage by comparing interest rates. What a delusion. Your time would be far better spent calling 5 of your trusted friends who have recently purchased or refinanced and interviewing them. Thanks, Fran

Ronald..... I will be writing that post tomorrow, about APR. It can factor into how someone shops, but it doesn't work all the time.... Shopping APR that is. And I will explain why. thanks for stopping by.

Marlene.... finding someone to explain the breakdown and all differences is so key. And there are lots of layers for confusion. Thanks for the compliment.

Paula..... my pleasure and so very true. We just need to educate them on this.

Fran... yes and no, when it comes to asking your friends and family. They might not always make the right decisions also. I have seen some that gave out a referral that would backfire on them. But I guess this could be said for anything done in life. But we both agree, that shopping for a rate is just a delusion.

My worst call? "What are your rates and fees?" Me... for a trip for 4 to Florida or for a 30 yr fixed rate mortgage? Just a loaded question that needs to be broken down. Thanks for the compliment.

Having a good GFE is only the start - trusting the LO that gave it to you is more important. It is unfortunate but many LO's do not follow through with their original GFE they gave.

SEP

2007

Hi Jeff, Our goal is to make a GFD-Good Faith Definite! We would rather the borrower get the fees as discussed or better at the table than just throw some numbers at them. Usually our borrowers get disclosures from the lender that make no sense because they are so much higher.

Too many loan officers have no idea about title fees, lender fees, recording taxes in individual areas, much less about what to include in the APR. It is always sad to me to see a GFE from a competitor that doesn't have any lender fees, taxes, etc. and the APR that is the same as the Rate or lower. Is this fraud or just lack of education? In too many cases, it's the former!

What we have found is that if the competitor gets the business in a case like this, once they see the real numbers at the table (and unfortunately, most go ahead and sign the docs because they feel they have no choice) they realize that we told them the truth! Often we get the refi business and the referral business becuase they finally get what we have been telling them.

Thanks for all you do.

SEP

2007

i have a question. my mortgage broker gave me a gfe over a month ago that did not include a broker fee. it did have an application fee however of $400. now i am getting ready to close and he wants me to sign another gfe that has broker fees on there of 3%. i don't want to lose the house but i feel this is wrong. also i signed an agreement with the company but it did not disclose those fees. what would you recommend i do.

SEP

2007

Brian, Get another opinion from another loan officer. If this is a purchase, talk to your Realtor, hopefully they will be able to help you negotiate a fair fee. If this is a refinance, talk to the LO, let him/her know that this is not acceptable and see if you can negotiate a fair fee, the loan officer should get paid for what they have done to help you, but changing the fee (especially by 3% at the last minute) seems to me to be unfair lending practices! DO NOT SIGN a new GFE with the 3% broker fee, until you are SURE that is what you should do.

Have you discussed this with your loan officer to find out why the GFE's are so different?

Where are you located? I would be happy to take a look at the GFE and help you to find someone in your area to take care of you. Unfortunately some loan officers are not completely honest up front, it could have been an oversight on their part, but it could have been a bit of "bait and switch".

Email Jeff directly, from what I have read he is great at what he does and would be happy to help you. If you need help in Maryland, email me at bmcgee@alliedhomenet.com.

SEP

2007

Very nice, do you care if we share this?

SEP

2008

Great information Jeff. I'm in the proces of putting together my buyer's packet and this is terrific! I thought I had all the information I needed until I read your article.

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