Rates & Fees
Comparing closing costs isn't as easy as it sounds. Lenders and brokers charge all kinds of fees giving them a wide variety of names. One might say that it doesn't charge an "application fee", but it makes that up by charging a "commitment" fee or "doc prep" fee at closing. Don't rely on what your being told before see your Good Faith Estimate faxed or mailed! And don't accept a lender's "that's just the way it is" answer when asking why your good faith estimate shows $5,000 in assorted fees for a $100,000 mortgage.
An estimate of the final loan figures can be found on the Good Faith Estimate, or GFE, a three-page government-mandated form brokers and lenders are required to give prospective borrowers within three days of a loan application. A standard GFE form can be found at hud.gov web site. Here you can find a short explanation on what to expect when getting your home loan Good Faith Estimate.
Good Faith Estimate Page One
The first page of the Good Faith Estimate is a summary of your mortgage terms. It lists your name and property address; one available mortgage rate-and-fee combination; and your bottom-line settlement charges among other items.
The Good Faith Estimate includes a section which explains the duration for which the GFE is valid. For loans with rate locks periods, the GFE will indicate the number of days for which the rate lock is valid. Other items included in the summary section include loan size, term, loan's initial interest rate, and monthly principal + interest obligation at the start of the loan.
Another GFE section lists whether an escrow account is required in your mortgage, and whether you're required to escrow in order to get access to the mortgage rate provided. Some mortgage programs, including FHA loans and conventional loans over 80% loan-to-value, require escrow accounts for a mortgage to be approved.
The last section on the first page of GFE describes your bottom-line due at closing. It may vary from the actual amount of cash you are required to bring to closing.
Good Faith Estimate Page Two
The second page of the Good Faith Estimate is a summary of your closing costs and funds required for you to deposit on escrow. It includes:
- Our origination charge - a sum of all lender-charged fees.
- Loan's accompanying discount points - charged to reduce the interest rate on your mortgage.
- Other settlement services charges - a listing of non-bank-related charges you should expect to pay in conjunction with your mortgage. Split over 9 separate categories, these fees and charges are estimates but lenders are required by law to be "within range" of the final settlement fees to promote fair comparison. The fees listed in the "Other Settlement Services" include appraisal fees as well as flood certification fees for homeowners in flood plains. There may be fees that are charged by state and local governments, such as - recording charges for your mortgage, transfer stamps etc.
- Lastly, the 2nd page of the GFE shows the amount of prepaid mortgage interest due at closing, as well as whatever real estate tax and homeowners insurance premiums are due. Collectively, these charges are known as Prepaid Items. They are NOT mortgage closing costs despite their inclusion in your settlement charges.
Good Faith Estimate Page Three
The 3rd page of the Good Faith Estimate explains what Page 1 and Page 2 say, and provides instruction for comparing loans between multiple mortgage lenders. It also includes a listing of mortgage-related fees, sorted by whether they're allowed to change.
Get A Free Good Faith Estimate
Mortgage rates vary between lenders, and so do the fees that they charge at settlement. It's always wise to "shop around" - a better deal may be available to you. It could be lower rates or lower fees, or both. Based on the information you submit, FHA.US.com searches its database of lenders to match you with the lender and loan that is best suited to your needs. Compare offers and know your estimate rate and closing costs in 24 hours. Online pre-qualification is free and there's no obligations. Submitting your inquiry for a loan at FHA.US.com incurs absolutely no cost. Start Here!
