There is a lot that goes into buying a home, and if you are new to the real estate world, there may be terms and concepts you have never heard of and don’t fully understand.
It is important to know that understanding certain aspects of the process — for example, knowing what a “good faith estimate” is — can actually help you cut costs and get a better deal on your home purchase.
So what, exactly, is a good faith estimate, and how can it help you save money during the homebuying process?
A recent article from realtor.com addressed common questions about good faith estimates, including:
What is a good faith estimate?
A good faith estimate (also known as a GFE) is a document from a lender that outlines approximately how much you will pay in fees if you decide to use that lender to purchase your home. Getting a GFE doesn’t guarantee that you will work with the lender, nor does it guarantee that they will approve you for a mortgage. Instead, the document helps you better understand the total costs associated with a loan.
How do GFEs help you save money?
GFEs generally include estimates for a variety of costs, including loan processing fees; interest rates; the cost of taxes, insurance, and government fees; third-party fees; closing costs; and any additional fees associated with the loan, such as early pay-off penalties. By getting GFEs from multiple lenders, you can compare the total costs of different loans and use that comparison to snag the most competitive mortgage.
Can GFEs change before closing?
As the name suggests, GFEs are estimates. So while many of the fees on a good faith estimate will stay exactly the same once you move forward with the loan, others may change slightly by the time you close on your home. But if you are working with a reputable lender, the differences should be extremely minor.
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