WHAT IS A GOD FAITH ESTIMATE
Definition of a Good faith Estimate(GFE)
A Good Faith Estimate is a document outlining the settlement services charges that you may likely incur in the closing process of buying a home.According to the terms of the Housing Authorities (RESPA),This document must be presented to you,the buyer by the lender when you apply for a mortgage loan.
What is Involved.
Some lending institutions follow the practice of designating specific service providers to perform different services in the process eg. legal, title insurance, title examinations, recordings etc.
If this happens in your case, the lender is obliged to furnish you with the following information:-
a. The Name, Address and Telephone number of the firm that he has designated, and what duties they are to perform.
b. Whether each designated firm has a business relationship with the lender.
This could enlighten you as to whether there is a conflict of interest and if so, whose interest is getting priority.
How Accurate is the Estimate?
It must be borne in mind that what is given to you are only estimates of charges.The final cost may show some differences. This should also be explained to you by the lender as it could result in wasted time to have such differences settled on the day of closing.
It must also be understood that estimates can change overnight according to market changes and so the final cost may not be the same as the original. Changes in the date of settlement may result in changes in escrow and proration as required. Market changes may even result in minor changes in the rate of interest. On the other hand the difference in estimation may be as a result of changes in pricing brought about by the settlement firms.
Fees and Charges
Some of the charges to look for in the Good Faith Estimate are:-
Loan Fees, Title Charges, Fees to be paid in Advance, Gov’t Charges, Additional Charges, Reserves etc.
HUD-1 and the Good Faith Estimate.
The Hud-1 Settlement Statement used at closing uses the exact numbering as that of the Good Faith Estimate. This gives you the buyer an opportunity to compare the lenders estimate with the Settlement Statement presented by HUD at the closing.The HUD statement should be closely scrutinized, line by line before the final signing takes place.
The HUD Statements are so set up that you the buyer, can understand clearly what each item is about and so be able to make changes if necessary or to make intelligent decisions.
Settlement practices differ from state to state. A most common practice is that the settlement may be conducted by an escrow agent which may be a lender,real estate agent,title company representative,attorney or an escrow company.
After entering into a contract of sale, the parties sign an escrow agreement. The agent then carry out all that is necessary to complete the transaction as authorized in the escrow agreement.The escrow agent then records the appropriate documents and give each party the Settlement Statement. The escrow is now closed and the buyer and seller can now go on their merry way quite satisfied with the result of the proceedings.