Mortgages Understanding your Good Faith Estimate Gfe

Why is the Good faith Estimate (GFE) so important? Under the real Estate Protection Act (RESPA, HUD needed to find a way to unify the true charges for a home mortgage. Prior to the GFE and RESPA, banks and lenders simply used whatever form they designed to disclose their charges to you the borrower. The GFE is designed to be used in conjunction of the TIL, the Truth-in-Lending disclosure. Both must be given to anyone who makes an application for a mortgage loan within 3 days of such an event. If you fail to receive any of these forms, the loan officer is in violation of the law. What the GFE does is provide you with a true estimated cost of the mortgage loan your are applying for. The GFE is bracketed into 3 sections. The first is the lender charge section that includes fees for the appraisal and credit report as well. The second is the prepaid, or escrow section where you will see the per-diem interest, taxes, insurance and other impounds associated with your mortgage. The final section is devoted to title charges and closing. This section is referred to as the closing cost section. Do not confuse closing costs with settlement charges. Settlement charged represent everything on the GFE. Finally, there is a little known line near the bottom that lists Lender paid fees to broker, or YSP (Yield Spread Premium). No here is the rule of thumb to use on any type of first mortgage: If your total GFE charges in the first section, less appraisal and credit report fee is 2% or more of your loan amount and there is a YSP disclosed by th broker (Lenders are not required to disclose this), then you are being overcharged for the loan. Junk fees such as a processing fee is almost always something you can request to be removed. Loan Officers, lenders and banks alike, can absorb this fee easily. However, underwriting fees are not negotiable. Never pay more than 1% loan discount, provided that you are actually getting a lower rate; and never pay it on an adjustable rate mortgage. You will never recover the cost of that expense. Loan origination fees are the basis by which a loan officer earn his/her commission. If there is a YSP, then ask for it to be removed. If you are purchasing a home and the seller is paying all of your costs, then get yourself the lowest fixed rate possible, using all available money after the title, escrow and underwriting charges have been paid. If the actual settlement charges are more than $200.00 higher at closing, or the APR changes by more than 1/8%, then the lender is required to re-disclose to your the changes no less than 24 hours prior to closing. That will also be time you are entitled to preview the HUD settlement statement. Feel free to question every charge on the GFE.
For more information, you can request the Fannie Mae Guide, or for extremely detailed information, you can download my book from The GFE should always be complete with all information, including the payment, rate, term, address, YSP, all escrow charges, details of the transaction, and title insurance.