Avoiding Frustration - How to Read a Good Faith Estimate: It's more than just a list of fees! ... part 1

How to Read a Good Faith Estimate:
It's more than just a list of fees!

You would think that, with such an important document, that there would be better instructions on how to read (and understand) a Good Faith Estimate.  And, though it seems rather up-front and self-explanatory, you can get yourself into a lot of hot water if you are shopping lenders and don't know what you're looking at.

Not understanding it fully could cost you hundreds, if not thousands, of dollars.

But, before we begin, it is worth mentioning that interest rates change daily - sometimes several times in one day.  If you really want to do yourself justice and shop for the best rate and fees, you need to do it on the same day.

Otherwise, you could be comparing apples to oranges.

** NOTE: If you pressed for time and have to shop lenders on different days, please give the other mortgage professionals a courtesy call.  Rates might have changed for the better and they can now match or BEAT that "great rate" you found. **

In this installment, we will address Section 800: ITEMS PAYABLE IN CONNECTION WITH LOAN.  This section, truly, is the only section your Mortgage Professional has any control over.  If you want to know why your Mortgage Professional doesn't have control over the other sections, you'll just have to come back for my future installments.

Let's break it down:

Section 800: ITEMS PAYABLE IN CONNECTION WITH LOAN

801: Loan Origination Fee - What your Mortgage Professional is charging you to do the loan.

802: Loan Discount - What you are being charged for your interest rate (should ONLY be present if you are getting a rate LOWER than what is being offered by the market).  Read this blog entry to determine if you should pay points.

803: Appraisal Fee - Third party fee to assess the value of the property

804: Credit Report -The charge associated to pulling your credit report.  Contrary to popular belief, this is a third party fee.

805: Lender's Inspection Fee - What a lender will charge you if they must physically go to the property to inspect it.

808: Mortgage Broker Fee - If you are working with a Mortgage Broker, this is where their "Origination" fee should be.  In the states of Idaho and Washington, it is ILLEGAL for a Mortgage Broker to put their fee on line 801.  They MUST put it on line 808.  Why?  Politics.

* Note: you should NEVER see a fee on line 801 and 808 at the same time!!!!

809: Tax Related Service Fee - I have seen this line debated and debated.  I have found two main reasons for this fee: 

1 - Your lender is charging you a fee in order to pay your taxes;

2 - Your lender is paying a 3rd party company to monitor the taxes on your property to make certain the amount and, in the event you decide to pay your taxes yourself, to make certain they are being paid in order to avoid a tax lien (one of the very few items which will take a lender out of first position).

810: Processing Fee - In some cases, your Mortgage Professional might use a 3rd party Loan Processor to process your loan and paperwork.

811: Underwriting Fee - Usually this fee is reserved for 3rd party underwriters.  For example, your loan requires Private Mortgage Insurance and your lender sends it to the PMI company to underwrite your loan.

812: Wire Transfer Fee - Some lenders charge a fee to wire the loan funds to the title company or attorney office where you close your loan.

Blank lines:  There are other miscellaneous fees that can be associated to getting a loan.  If there is something typed on these lines, ask your Mortgage Professional what they are for and if they are negotiable.

To learn more, please stay tuned for future installments of this series.

Maryellen Garasky
Mortgage Broker
KMG Mortgage Group
(208) 664-3600
(509) 638-3455
www.kmgmortgagegroup.com