The Good Faith Estimate is an "ESTIMATE" of the cost of the loan you've applied for.
The lender is required to provided you with it and its' companion the "Truth in Lending" form within three days of your application.
We're going to go through it line by line, but the individual lines are unimportant! You should be concerned in the total cost of the loan not individual line items.
There's an old saying "figures never lie, but liars figure" it is never so true as it is in these two forms. Because, different rules apply to brokers as compared to bankers a quick glance at the form by the uninformed consumer all to often misleads the consumer.
Because of the constantly changing market it's rare that a loan closes in accordance with the original disclosures. This fact along with the variables that can't be controlled mean that the original disclosures are only as useful as your originator's integrity. It's this reason why you never select your originator by the lowest rate.
The "big lie" in mortgage lending is quoting a low rate and/or (normally and) lower cost, the consumer only finds out he's been lied to at or just before closing, at which time it's to late to switch lenders. If the consumers refuse the new loan, they'll generally lose their earnest money, and appraisals fees, with new homes they can lose additional thousands advanced for upgrades. Despite everything the only real protection the consumer has is the integrity of the originator!
Line 801 * Loan Origination fee
Money paid for the origination of the loan, by tradition this is normally 1 point (1 point is 1% of the loan amount) In practice this is never the only amount paid for origination.
Origination should included all points charged by the lender, but in practice it often is either 1 or 0 with the difference included in the discount points.
Line 802 * Loan Discount
Discount also expressed as points, was originally/properly used to adjust the yield of a loan, in current practice it is often includes any amount paid for origination that is smaller than one or exceeds the one listed in line 801.
This is eddied copyrighted material from "Get The Money / A Consumers Guide To A Successful Mortgage Application" republished here by the author with permission of the publisher. Watch for the next part and then "Truth In Lending."
Bill
William J Archambault Jr
The Real Estate Investment Institute
Links:Part 1 Good Faith Estimate Part 1
Bill
William J Archambault Jr
The Real Estate Investment Institute
wja@reii.org Cell 832-259-7078, Houston 832-582-8415, Las vegas 702-516-1569
From my past: GRI 1975, FLI 1974, Catalyst from a client 1974 an agent that makes things happen, REII, The Real Estate Investment Institute 1995.
©William J Archambault Jr ©The Real Estate Investment Institute ©REII
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"Get The Money / A Consumers Guide To A Successful Mortgage Application"
William J Archambault Jr
author of:
One House At A Time / Finding And Buying Single Family Rentals
Flipping For Fun And Profit
A Baker's Dozen / A Real Estate Anthology
Available from:
The Real Estate Investment Institute
http://www.reii.org wja@reii.org