A good faith estimate, referred to as a GFE, was a standard form that (prior to 2015) had to be provided by a mortgage lender or broker in the United States to a consumer, as required by the Real Estate Settlement Procedures Act (RESPA). Since August 2015, GFE has been replaced by a loan estimate form, serving the same purpose but following slightly different guidelines set by CFPB, so as to reduce consumer confusion. A good faith estimate (or a loan estimate) is a standard form intended to be used to compare different offers (or quotes) from different lenders or brokers. The estimate must include an itemized list of fees and costs associated with the loan and must be provided within 3 business days of applying for a loan. Since RESPA does not apply to Business Purpose Loans, no GFE is provided in those transactions.
These mortgage fees, also called settlement costs or closing costs, cover every expense associated with a home loan, including inspections, title insurance, taxes and other charges.
The good faith estimate is only an estimate. The final closing costs may be different; however the difference can only be 10% of the third party fees. Once a good faith estimate is issued the lender/broker cannot change the fees in the origination box.
Fees and charges
The fees included within a good faith estimate fall into six basic categories:
Loan fees
Fees to be paid in advance
Reserves
Title charges
Government charges
Additional charges
The following is a list of the typical charges. Each charge starts with a number – the same number as the number of the charge on a HUD-1 Real Estate Settlement Statement. This makes it easier to compare the charges a loan applicant receives on the good faith estimate to the HUD-1.
800 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 – the same as “buying the rate down”
803 - Appraisal Fee
This is the cost of the independent appraisal. It is usually paid by the 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 the buyer's application, running credit, collecting pay stubs, bank statements, ordering appraisal, title, etc.
811 - Underwriting Fee
This is the cost of the loan underwriter (approver)
812 - Wire Transfer Fee
This is the cost of wiring the money around, which is usually done by escrow.
900 ITEMS REQUIRED BY LENDER TO BE PAID IN ADVANCE
901 - Interest for days X $ per day
This is the prepaid interest for a mortgage loan.
902 - Mortgage Insurance Premium
This is the prepaid mortgage insurance premium, if needed. This is the insurance premium some lenders charge for loans with little equity.
903 - Hazard Insurance Premium
This is used to record hazard insurance premiums that must be paid at settlement in order to have immediate insurance on the property. It is not used for insurance reserves that will go into escrow.
905 - VA Funding Fee
This is the Veterans Administration funding fee, which is only applicable if the loan is through a VA program.