Are you having trouble understanding the good faith estimate on your mortgage loan? You know that the fees can add up, but do you know what each of them are for?
You have a right to question any charge at the closing of a home that you may consider excessive and/or unexpected. Being able to identify these fees may be able to save you hundreds of dollars.
Your good faith estimate provides a list of fees you can expect
When you apply for a home loan, your lender is required to provide you with a Good Faith Estimate (GFE), also referred to as simple a Loan Estimate (LE). This document shows the loan terms and an itemized list of the settlement fees you can expect your lender to charge for providing and closing on your loan.
These fees should be clearly stated, but keep in mind that the GFE is only an estimate. Fees that are listed include, but aren’t limited to:
- Application fee
- Origination and broker fees
- Inspection fee
- Underwriting fee
Certain fees cannot increase more than 10%
In 2015, the Consumer Financial Protection Bureau reformed the closing process, stating that certain fees in a good faith estimate cannot be inflated more than 10%. These fees include recording fees and fees for third-party services like appraisals. If the provider is an affiliate of the lender, the cost cannot change.
Costs that aren’t controlled by the lender, like prepaid interest, can increase at any time by any amount.
Examine all fees before closing on your loan
Before closing on your loan, review your closing papers carefully. You have the right to dispute your fees and ask your lender what each fee presented covers. Keep an eye out for miscellaneous items and be sure to ask your loan officer to specify what the fee is for.
It’s also a good idea to compare the fees listed on your HUD-1 settlement statement to your good faith estimate to make sure they match. Since HUD-1 statements are used during the loan shopping process, be sure you reference the statement issued for the right loan.
At Smartmortgage, our professional agents are always happy to walk you through any fees you may not understand. We strive to be transparent to ensure a smooth, positive homebuying experience.
The above information is for educational purposes only. All information, loan programs and interest rates are subject to change without notice. All loans subject to underwriter approval. Terms and conditions apply. Always consult an accountant or tax advisor for full eligibility requirements on tax deduction.