New Good Faith Estimate (GFE)
The new GFE is a three page form designed to encourage you to shop for a mortgage loan and settlement services so you can determine which mortgage is best for you. It shows the loan terms and the settlement charges you will pay if you decide to go forward with the loan process. It explains which charges can change before your settlement and which charges must remain the same. It contains a shopping chart allowing you to compare multiple mortgage loans and settlement costs. The GFE may be provided by a mortgage broker or the lender. Until they give you a GFE, loan originators are only permitted to charge you for the cost of a credit report.
Page 1 of the GFE
The top of page 1 of the GFE shows the property address, your name and contact information and your loan originator’s contact information.
The Important Dates section of the GFE includes key dates of which you should be aware.
Line 1 discloses the date and time the interest rate offer is good through.
Line 2 discloses the date “All Other Settlement Charges” is good through. This date must be open for at least 10 business days from the date the GFE was issued to allow you to shop for the best loan for you.
Line 3 discloses in how many calendar days you must go to settlement once the interest rate is locked.
Line 4 discloses how many calendar days prior to settlement the interest rate would have to be locked, if applicable.
The Summary of Your Loan Terms discloses your loan amount, loan term, the initial interest rate and the principal, interest and mortgage insurance portion of your monthly mortgage payment. It also informs you if your interest rate can increase, if your loan balance can rise, whether your mortgage payment can rise and if there is a prepayment penalty or balloon payment.
The GFE also includes a separate section referred to as ‘‘Escrow account information,’’ which indicates whether or not an escrow account is required. This account holds funds needed to pay property taxes, homeowner’s insurance, flood insurance (if required by your lender) or other property-related charges.
The final section on page 1 of the GFE contains the adjusted origination charges and the total estimated charges for other settlement services which are detailed on page 2. You should compare the “Total Estimated Settlement Charges” on several GFEs.
Page 2 of the GFE
Your Adjusted Origination Charges, Block A
Block 1, “Our origination charge” contains the lender’s charges for originating your loan (PSFCU - application fee of $350.00)
Block 2, “Your credit or charge point(s) for the specific interest rate chosen.”
- If box 1 is checked, the credit or charge for the interest rate is part of the origination charge shown in Block 1.
- If box 2 is checked, you will pay a higher interest rate and receive a credit to reduce your adjusted origination charge and other settlement charges.
- If box 3 is checked, you decided to lock your rate and, therefore, will pay higher adjusted origination charges. (PSFCU – if you decide to lock your rate at the time of application, box 3 will be checked and fee amount will be disclosed here)
After adding Block 1 & 2, “Your Adjusted Origination Charge” is shown in Block A.
Your Charges for All Other Settlement Services, Blocks 3 through 11
In addition to the charges to originate your loan, there are other charges for services that will be required to get your mortgage.
Block 3 contains charges for required services for which the loan originator selects the settlement service provider. These are not “shoppable” services and often include items such as the property appraisal, tax service and any required mortgage insurance
Block 4 contains the charge for title services, the Lender’s title insurance policy and the services of a title, settlement or escrow agent to conduct your settlement.
Block 5 contains the charge for an Owner’s title insurance policy that protects your interests.
Block 6 contains charges for required services for which you may shop for the provider. Some of these items may include a survey or pest inspection.
Block 7 contains charges by governmental entities to record the deed and documents related to the loan.
Block 8 contains charges by state and local governments for taxes related to the mortgage and transferring title to the property.
Block 9 contains the initial amount you will pay at settlement to start the escrow account, if required by the lender.
Block 10 contains the charge for the daily interest on the loan from the day of settlement to the first day of the following month.
Block 11 contains the annual charge for any insurance the lender requires to protect the property such as homeowner’s insurance and flood insurance.
Total Estimated Settlement Charges
“Your charges for All Other Settlement Services”, Blocks 3 through 11, are totaled in Block B. Blocks A and B are added together resulting in the total estimated settlement charges associated with getting the loan. These Blocks are carried forward to the bottom of page 1 of the GFE.
Page 3 of the GFE
Page 3 of the GFE contains important information - there are three different categories of charges that you will pay at closing: charges that cannot increase at settlement; charges that cannot increase in total more than 10%; and charges that can increase at settlement.
If there are changes involving your credit, the loan amount, the property value, or other information that was relied on in issuing the original GFE, a revised GFE may be issued. Only the charges affected by the changed circumstance may be revised.
It is very important to keep your Good Faith Estimate so you can compare it with the final settlement costs stated on your HUD-1 Settlement Statement. Your lender must reimburse you if a closing cost tolerance was violated; therefore, ask the lender and settlement agent if there are any changes in fees between your GFE and your HUD-1 Settlement Statement.