A Good Faith Estimate (GFE) is an official document by a mortgage lender that shows an estimate of associated closing costs with your mortgage lender, loan terms and the loan amount. This document is dozens of lines long and can seem really confusing at times, especially when you see a new document updated often. Whether this is your first house or your tenth, understanding GFE changes will help you settle stress and give you more time to catch up on sleep. We all want more sleep, right?
So, you have your original GFE when you lock your rate and get a loan agreement, and you notice that you get updates about it all the time but don’t really notice any changes. Why is that?
By law, the Real Estate Settlement Procedures Act (RESPA) requires lenders to notify you of any changes (or potential changes) to your GFE. This is a good thing and will help you prepare financials so you aren’t surprised at closing. These costs can fluctuate during the process either higher or lower depending on what paperwork the lender has processed so far. For example, lender promotional credits can be applied, which will automatically update the GFE. Sometimes, the GFE will automatically update if the RESPA is updating in the system. Other times, appraisals come back different than expected, so we have to adjust for that, especially with an FHA loan.
Any time there is 1/8 of 1% (0.00125%) fluctuation higher or lower on the loan amount, we will notify you with the updated changes. For example, if the loan amount is 100k and the potential changes are $125, we will make you aware — even when we are crediting you. This can change often because when documents like Homeowners Insurance or tax returns are listed, we get a better idea of how much will be needed at closing. Think of it like a puzzle: each piece is eventually put in place and we don’t want you to be surprised when the puzzle is finished.
It sounds senseless at some points, but it’s about doing the right thing.
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