When obtaining a home loan, you’ll receive two important documents from your lender: a loan estimate and a closing disclosure. On the surface, these documents are very similar, but they both serve different purposes. Here’s what you need to know about the differences between these two forms and what each means for you:
Good Faith Estimates for Mortgages in KC
A good faith estimate (GFE) is provided by your Kansas City mortgage lender and outlines the estimated costs for your Kansas City mortgage. Therefore, a good faith estimate helps people applying for mortgages in KC comparison shop to gauge how much they will owe after closing.
What is Included in a Good Faith Estimate?
When you apply for mortgages in KC, your lender is required by law to give you a good faith estimate within three days of receiving your application. This deadline applies to all home loans in Kansas City and ensures that homebuyers stay informed throughout the home loan process. Good faith estimates also offer a good opportunity to compare different mortgage lenders.
Accuracy of a Good Faith Estimate
A good faith estimate is not a hard and fast figure. With this estimate, mortgages in KC have some room for fluctuation.
Charges That Cannot Be Raised at Settlement
While estimates are not perfect, there are several good faith estimate charges that cannot rise above the estimated amount without a penalty to the lender. Examples include your lender’s origination charge or the number of discount points your loan is charged. However, these charges can be lowered at settlement, leaving some room for negotiation.
Charges That Can Increase by 10% at Settlement
Some of the charges on your good faith estimate may be subject to a “10% tolerance,” or can be raised up to 10% of their stated cost without penalty to the lender. Usually, these items are non-comparable, or cannot be used for comparing different mortgage lenders. If an item increases by more than 10%, the difference is paid by the lender, not you.
Charges that Can Change at Settlement
There are several items in good faith estimates for mortgages in KC that can fluctuate with no penalty to the lender. These charges are usually used as a pillow to protect you and your lender against any unforeseen change in the market, such as a reassessments in property value or a raise in property taxes. Any overcharge made in these categories will eventually be returned to you.