Good Faith Estimate - Explains how to read a Good Faith Estimate & other commmon mortgage loan terms...
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How to Read a Good Faith Estimate
A lot of people know that they are supposed to receive a Good Faith Estimate within 3 days of
applying for a loan; and that this Good Faith Estimate is supposed to disclose all of the
expenses associated with acquiring a home loan. The area that many people can use some assistance
with is understanding the many costs and charges that may be on the Good Faith Estimate you
receive from your broker or lender. How else can you determine whether or not these charges
are acceptable to you but by first understanding each one? How else can you compare the offers
between multiple brokers but by comparing the Good Faith Estimates provided by each?
(A key thing to remember when comparing offers is that the 'GFE' is only an estimate. So keep in mind that some lenders and brokers have less 'Good' in their 'Good Faith Estimate' than others...)
These quick explanations will help you understand many of these closing costs, and how you can save on them. Keep in mind that some lenders or brokers add their own custom fees to the good faith estimate.
The fees on a G.F.E. come in these basic categories:
1. Loan fees
2. Fees to be paid in advance
3. Reserves
4. Title charges
5. Government charges
6. Additional charges
The following is a list of the typical charges. Each charge starts with a number – the same number is the number of the charge on a HUD-1 Real Estate Settlement Statement. This makes it easier to compare the charges you are looking for on your good faith estimate to the HUD-1.
ITEMS PAYABLE IN CONNECTION WITH LOAN:
801 - Loan Origination Fee
This fee is a charge for originating or creating the loan
802 - Loan Discount
This is an upfront charge paid to the lender to get a lower mortgage rate – same as “buying the rate down”
803 - Appraisal Fee
This is the cost of the independent appraisal. It is usually paid by the borrower/buyer
804 - Credit Report
This is the cost of the credit report
805 - Lender's Inspection Fee
This is the lender’s cost of inspecting a property – some may double check the appraisal provided by an independent appraiser
808 - Mortgage Broker Fee
This is the upfront charge that a mortgage broker charges. Brokers can also earn a “rebate” from the lender which is not listed here
809 - Tax Related Service Fee
Lender fee, usually small, for handling tax related matters
810 - Processing Fee
This is the charge for processing the loan – collecting your application, running credit, collecting pay stubs, bank statements, ordering appraisal, title, etc.
811 - Underwriting Fee
This is the cost of the loan underwriter (lender)
812 - Wire Transfer Fee
This is the cost of wiring the money, which is usually done by escrow
ITEMS REQUIRED BY LENDER TO BE PAID IN ADVANCE
901 - Interest for days X $ per day
This is your prepaid interest for your mortgage loan
902 - Mortgage Insurance Premium
This is the prepaid mortgage insurance premium, if you have one. This is the insurance premium some lenders charge for loans with little equity
903 - Hazard Insurance Premium
This is your home’s hazard insurance being prepaid
905 - VA Funding Fee
This is the Veterans Administration funding fee, which is something you will not incur unless you go through a VA program
RESERVES DEPOSITED WITH LENDER
1001 - Hazard Insurance Premiums # months @ $ per month
This is any prepayment of your future hazard insurance expense
1002 - Mortgage Ins. Premium Reserves months @ $ per month
This is any prepayment of your future mortgage insurance expense
1003 - School Tax months @ $ per month
This is any prepayment of your future school tax expense
1004 - Taxes and Assessment Reserves months @ $ per month
This is any prepayment of your future tax expenses, such as property taxes
1005 - Flood Insurance Reserves months @ $ per month months
This is any prepayment of your future flood insurance expense
TITLE CHARGES
1101 - Closing or Escrow Fee
This is the cost of escrow. This is the service of a neutral party that actually handles the money between all the different parties in a real estate transaction, including: the lender, the buyer, the seller, the agents, notary, etc. This is often done by the “Title Company” – a related entity in the same office that provides title insurance
1105 - Document Preparation Fee
This is the charge for preparing the loan documents. Lenders often email the loan documents to the escrow company, which in turn prints them out and reviews them before signing
1106 - Notary Fees
This is the cost of the notary. This is to have all of the legal documents surrounding this transaction notarized
1107 - Attorney Fees
Any legal charges. Some states use Attorneys to assist with legal aspects of the loan.
1108 - Title Insurance
This is the cost of insuring the title of the property. If there is a question about title (who really owned the property), after the transaction is done then this insurance protects the lender from future problems
1200 GOVERNMENT RECORDING & TRANSFER CHARGES
1201 - Recording Fees
This is the cost of updating relevant government records
1202 - City/County Tax/Stamps
Unavoidable government charge
1203 - State Tax/Stamps
Unavoidable government charge
1300 ADDITIONAL SETTLEMENT CHARGES
1302 - Pest Inspection
This is the cost of the pest inspector. Their purpose is to document the state of the property that the lender is making the loan on
The good faith mortgage estimate expenses are in 3 different categories:
1. Fixed Expenses – government charges
2. Slightly Varying Expenses – escrow, notary, pest inspector, appraiser
3. Highly variable – loan fees
The largest expenses are usually in the loan fee section. This is where you need to focus to try to get a good deal.
Compare the good faith estimates you receive from different brokers lenders. Keep in mind that these good faith estimate’s are only estimates. They can change, and sometimes become unpleasant last minute surprises.
MORGAGE GLOSSARY
Amortization | Amortization Schedule | Annual Percentage Rate - APR | Biweekly Mortgage | Bridge Loan | Cash Out | Conforming Mortgage | Conventional Morgage | Debt To Income Ratio | Direct Lender | Discount Mortgage Broker | Discount Points | Good Faith Estimate | Grace Period | Impounds | Interest Only | Jumbo Morgage | Loan To Value | LTV | Negative Amortization | No Ratio | Option Arm | Piggyback | PITI | PMI | Prepayment Penalty | Reverse Mortgage | Subprime | Truth in Lending | Wholesale Lender | Yield Spread Premium | YSP Debt Settlement Net Branch
(A key thing to remember when comparing offers is that the 'GFE' is only an estimate. So keep in mind that some lenders and brokers have less 'Good' in their 'Good Faith Estimate' than others...)
These quick explanations will help you understand many of these closing costs, and how you can save on them. Keep in mind that some lenders or brokers add their own custom fees to the good faith estimate.
The fees on a G.F.E. come in these basic categories:
1. Loan fees
2. Fees to be paid in advance
3. Reserves
4. Title charges
5. Government charges
6. Additional charges
The following is a list of the typical charges. Each charge starts with a number – the same number is the number of the charge on a HUD-1 Real Estate Settlement Statement. This makes it easier to compare the charges you are looking for on your good faith estimate to the HUD-1.
ITEMS PAYABLE IN CONNECTION WITH LOAN:
801 - Loan Origination Fee
This fee is a charge for originating or creating the loan
802 - Loan Discount
This is an upfront charge paid to the lender to get a lower mortgage rate – same as “buying the rate down”
803 - Appraisal Fee
This is the cost of the independent appraisal. It is usually paid by the borrower/buyer
804 - Credit Report
This is the cost of the credit report
805 - Lender's Inspection Fee
This is the lender’s cost of inspecting a property – some may double check the appraisal provided by an independent appraiser
808 - Mortgage Broker Fee
This is the upfront charge that a mortgage broker charges. Brokers can also earn a “rebate” from the lender which is not listed here
809 - Tax Related Service Fee
Lender fee, usually small, for handling tax related matters
810 - Processing Fee
This is the charge for processing the loan – collecting your application, running credit, collecting pay stubs, bank statements, ordering appraisal, title, etc.
811 - Underwriting Fee
This is the cost of the loan underwriter (lender)
812 - Wire Transfer Fee
This is the cost of wiring the money, which is usually done by escrow
ITEMS REQUIRED BY LENDER TO BE PAID IN ADVANCE
901 - Interest for days X $ per day
This is your prepaid interest for your mortgage loan
902 - Mortgage Insurance Premium
This is the prepaid mortgage insurance premium, if you have one. This is the insurance premium some lenders charge for loans with little equity
903 - Hazard Insurance Premium
This is your home’s hazard insurance being prepaid
905 - VA Funding Fee
This is the Veterans Administration funding fee, which is something you will not incur unless you go through a VA program
RESERVES DEPOSITED WITH LENDER
1001 - Hazard Insurance Premiums # months @ $ per month
This is any prepayment of your future hazard insurance expense
1002 - Mortgage Ins. Premium Reserves months @ $ per month
This is any prepayment of your future mortgage insurance expense
1003 - School Tax months @ $ per month
This is any prepayment of your future school tax expense
1004 - Taxes and Assessment Reserves months @ $ per month
This is any prepayment of your future tax expenses, such as property taxes
1005 - Flood Insurance Reserves months @ $ per month months
This is any prepayment of your future flood insurance expense
TITLE CHARGES
1101 - Closing or Escrow Fee
This is the cost of escrow. This is the service of a neutral party that actually handles the money between all the different parties in a real estate transaction, including: the lender, the buyer, the seller, the agents, notary, etc. This is often done by the “Title Company” – a related entity in the same office that provides title insurance
1105 - Document Preparation Fee
This is the charge for preparing the loan documents. Lenders often email the loan documents to the escrow company, which in turn prints them out and reviews them before signing
1106 - Notary Fees
This is the cost of the notary. This is to have all of the legal documents surrounding this transaction notarized
1107 - Attorney Fees
Any legal charges. Some states use Attorneys to assist with legal aspects of the loan.
1108 - Title Insurance
This is the cost of insuring the title of the property. If there is a question about title (who really owned the property), after the transaction is done then this insurance protects the lender from future problems
1200 GOVERNMENT RECORDING & TRANSFER CHARGES
1201 - Recording Fees
This is the cost of updating relevant government records
1202 - City/County Tax/Stamps
Unavoidable government charge
1203 - State Tax/Stamps
Unavoidable government charge
1300 ADDITIONAL SETTLEMENT CHARGES
1302 - Pest Inspection
This is the cost of the pest inspector. Their purpose is to document the state of the property that the lender is making the loan on
The good faith mortgage estimate expenses are in 3 different categories:
1. Fixed Expenses – government charges
2. Slightly Varying Expenses – escrow, notary, pest inspector, appraiser
3. Highly variable – loan fees
The largest expenses are usually in the loan fee section. This is where you need to focus to try to get a good deal.
Compare the good faith estimates you receive from different brokers lenders. Keep in mind that these good faith estimate’s are only estimates. They can change, and sometimes become unpleasant last minute surprises.
California Mortgage and reading your Good Faith Estimate
Anyone considering morgage refinance should first find out your real estate home values visit USFreeAppraisals... Thank you again for choosing Ascendant Financial as your Low Rate California Mortgage Loan brokerage of Debt Settlement Net Branch choice.MORGAGE GLOSSARY
Amortization | Amortization Schedule | Annual Percentage Rate - APR | Biweekly Mortgage | Bridge Loan | Cash Out | Conforming Mortgage | Conventional Morgage | Debt To Income Ratio | Direct Lender | Discount Mortgage Broker | Discount Points | Good Faith Estimate | Grace Period | Impounds | Interest Only | Jumbo Morgage | Loan To Value | LTV | Negative Amortization | No Ratio | Option Arm | Piggyback | PITI | PMI | Prepayment Penalty | Reverse Mortgage | Subprime | Truth in Lending | Wholesale Lender | Yield Spread Premium | YSP Debt Settlement Net Branch