What is a Good Faith Estimate?
Answer:
It is normal for a new homebuyer to be a little apprehensive
with the mortgage process. Even if the homebuyer has money for a down payment, thoughts about closing or settlement costs may cause additional stress. Closing costs vary depending on the sale price of the home, and homes that are more expensive incur higher fees.

Fortunately, lenders inform buyers of estimated closing costs before finalizing loan documents. In fact, once a mortgage application receives approval, lenders are required to provide a good faith estimate within three business days. Even though this document is subject to change, it will provide buyers with a fairly accurate estimate of all closing fees. 

Typically, the good faith estimate is divided into four sections. The first section outlines the closing fees, which are due in full at closing. Secondly, the good faith estimate will list all pre-paid expenses that are necessary to establish an escrow account. Next, the good faith estimate provides a rough approximation balance sheet, which highlights funds the borrower will either pay or receive at closing. The final section of the good faith estimate provides borrowers with an estimated housing payment. This amount includes principle, interest, taxes, and insurances. 

Lenders attempt to provide buyers with a close estimate of anticipated closing fees. Even so, the final amount due at closing may vary. Fortunately, actual settlement costs rarely exceed 15% of the estimated cost.
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