When you find the right home, or know what you’re looking to spend, you’ll need to find a mortgage lender. But before you can get approved for a loan, you have to find the home you want to buy so that you can find out if you’ll be approved for enough to cover the cost of the home.
Sounds like a double edged sword huh? Don’t worry, it’s actually pretty easy because you can have a lender provide you with a Good Faith Estimate (GFE) as long as you have a reasonable idea of what you are willing on a house or property at a maximum. It is a fairly painless and quick process. Having a Good Faith Estimate or GFE also lets sellers know you’re serious and will have the capital to purchase the property. This is especially important in competitive markets.
The Process of Getting a GFE is:
- Get prequalified thru lender
- Shop for and find house
- Submit contract (k) for sale
- K gets approved
- Fill out loan app (1003)
- Lender approves 1003
- Lender has 3 days after approval to issue to borrower GFE
- Covers estimated closing and most importantly estimated monthly payment
But what happens if you don’t get approved for the amount you need, or the loan estimate doesn’t seem fair, you don’t have to worry. You are able to get multiple GFEs from multiple lenders.
What is a GFE and What Does it Look Like?
A good faith estimate is a form that includes all of the fees, payments, and financial information that you will be provided with by a lender. As stated above, you are not limited to only one good faith estimate. You can acquire a good faith estimate from numerous lenders and banks so that you can shop for a loan that helps you buy the property you want and meets your specific needs.
Which Fees Are Covered and Not Covered by a GFE
One common question is if a good faith estimate covers closing costs. Yes, your good faith estimate is inclusive of closing costs, the loan, the terms of the loan and almost all other finances for buying a home and using a lender. Some of the fees may be an estimate if you do not already have the property picked out, but if you do, it should be close to accurate.
However, title insurance, additional inspections, and other miscellaneous items may not be included. You’ll want to talk to your real estate agent, or the closing and settlement agent to find out if there will be any additional fees that may not be covered by the lender or in the GFE. This is because you can choose who your title, closing and escrow companies are. By being able to choose you can potentially save money, and because you may not have one picked out when getting the GFE, the lender will only be able to estimate based on industry averages.
In some cases, and depending on how you negotiate when shopping, the seller of the house may be willing to pick up some of the costs outlined in the GFE, but that will depend on how quickly they want to sell, and also on your specific situation.
Where Can You Download a Sample GFE Form?
As mentioned above, the GFE is a form you are provided with. You can find a sample, and also download a good faith estimate form on the HUD website by clicking here. The good news is you do not have to fill this out yourself. It is handled by the lender.
A good faith estimate is not as scary as it may look when you first see it. Your real estate agent and closing company look at these regularly and should be able to assist you with any questions or concerns you have with the good faith estimate form. If you don’t feel comfortable asking them, we’re also able to assist. Contact us at firstname.lastname@example.org and one of our professional closing agents will be happy to alleviate any worries you have, and walk you through how we can help you with a hassle-free closing.