So, you’re ready to buy a home and can’t wait to begin looking at homes for sale! Before you start your home search, you will want to get your financing in place, or at least start the pre-approval process with a lender.
When you apply for a loan with a lender, you will receive a Good Faith Estimate (GFE). This is an important, official document, that covers closing costs, the loan amount, interest rate and other financing terms for the loan program being offered by your lender.
The GFE is a great tool for navigating your way through the all the numbers involved in the loan process. Lenders are required to use a standardized format with the same jargon so a buyer knows they are comparing apples to apples when comparing GFE’s from multiple lenders.
Here are some of the important loan terms covered in the Good Faith Estimate:
- loan amount
- interest rate
- origination charges
- title insurance costs
- transfer taxes
- other closing costs
Remember, this summary of the loan is just an estimate, and the lender must notify you of any changes (or potential changes) to your GFE. This will ensure there are no major surprises when it comes time to close on your home purchase.
There are some items in the GFE that cannot change (such as interest rate and origination fee after you lock in your rate, and transfer taxes), some items that can change by no more than 10% (title and escrow fees, if you use the company identified in the estimate, and government recording charges), and other items that can change with no restrictions (homeowners insurance, interest charge and the initial deposit for your escrow account.)
At close of escrow, don’t forget to make a line-by-line comparison of your GFE to the settlement statement provided by the title company to make sure that what your lender committed matches the actual numbers. If there is an error or oversight, you could save yourself hundreds of dollars in closing costs, if not thousands over the course of your loan.
The Matheson Team is a group of real estate experts who specialize in the Scottsdale area. Read more of our articles for home buyers.
Reach out to us if we can serve you in the Scottsdale area.
Realtor | Founder
The Matheson Team – RE/MAX Fine Properties
21000 N. Pima Rd., #100, Scottsdale, AZ 85255
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