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Benjamin Clark - Exclusive BUYER'S AGENT - Certified Negotiation Expert - SLC, UT

Shopping for a Loan - Understanding the New Good Faith Estimate (GFE) Form

New Good Faith Estimate (GFE) form

Due to RESPA Reform, as of January 1, 2010, lenders are required to use a new, uniform, Good Faith Estimate (GFE) form. This new form creates additional disclosure and transparency about the loan product being offered as well as the costs to the borrower. The Good Faith Estimate (GFE) form is 3 pages in length. All lenders will use the same form. This was not true prior to January 1, 2010.

Once a borrower has provided all the information necessary for a lender or broker to complete a Good Faith Estimate (GFE), the loan originator has 3 business days to deliver a Good Faith Estimate to the borrower. It can be delivered via email if the borrower consents.

Consumers will be able to use the new Good Faith Estimate (GFE) form to more easily compare loan proposals from various lenders.

The new Good Faith Estimate (GFE) form is now more binding on the lender. When I say "more binding," I mean that it IS binding with a few exceptions:

  • Some fees quoted are 100% binding on the lender if certain conditions are met.
  • Some fees quoted are subject to "tolerance levels" (can change up to 10% if certain conditions are met)
  • Some fees are not subject to any cap in the amount they can differ from what is quoted on the Good Faith Estimate (GFE) form.

We will go over, in detail, which fees fall into which category as we go through the Good Faith Estimate (GFE) form. The fees which are not subject to any tolerance cap are usually those where the borrower chooses to use a service not required to close the transaction, or uses a company, for a required service, other than a company identified by the lender (from which they derived their estimated cost). If the borrower selects one of the companies identified by the lender, or if the lender selects the company for a required service, the lender is bound to the figures quoted with up to a 10% tolerance.

There are 6 pieces of information that have to be on the Good Faith Estimate (GFE) in order for it to be binding on the lender or mortgage broker. They are:

  1. Borrower's Name
  2. Social Security Number
  3. Gross Monthly Income
  4. Property Address
  5. Estimated Property Value
  6. Loan Amount

If any of these pieces of information change during the transaction, the Good Faith Estimate (GFE) is no longer binding and the Lender or Broker will then issue a new Good Faith Estimate within 3 Business days. Anytime a new Good Faith Estimate is prepared, the borrower cannot close on that transaction for another 3 business days after receipt of the new Good Faith Estimate (GFE) form.

The sections, and therefore the numbers quoted, on the new Good Faith Estimate (GFE) form now correspond to identically numbered sections on the Settlement Statement (HUD1 or HUD1A) that the borrower sees at closing.

Let's examine these forms, beginning with the Good Faith Estimate (GFE) form, page 1:

Get an agent on your side when buying a home.  Homebuyer Representation, Inc. - Real estate agents on the Buyer's side!

Mortgage Shopping Will Soon be a Lot Less Complicated

Mortgage Loan Disclosures Costs and Settlement StatementMortgage shopping will soon be a lot less complicated.

RESPA Reform takes effect on January 1, 2010. While still not perfect, the changes do simplify the ability to compare loan offerings between lenders. The goal was to simplify and improve disclosure requirements for mortgage settlement costs under RESPA. My analysis: Mission Accomplished

Here are some key highlights for borrowers:

  1. The new Good Faith Estimate (GFE) and the New Settlement Statement (HUD1 or HUD1A) now correspond to one another. In the past, there was no direct correllation between line items, making it difficult for a consumer to know whether or not undisclosed junk fees were being charged at closing.
  2. Instead of breaking loan costs down into multiple line items, now, all costs being charged by the lender will be compiled into one total fee.
  3. Additional information about the loan (Is there a pre-payment penalty? Can this loan Adjust? etc.) is required to be disclosed on the Good Faith Estimate, creating more transparency about the loan.
  4. Lenders will be required to deliver on the Good Faith Estimate as quoted (NOTE: some items have allowable tolerances for change).

Here are some more changes and an overview of the new forms.

You will be better able to understand an compare loan proposals from different lenders if you have an agent who understands the process. Your best bet is to hire an Exclusive Buyers Agent who will work only on your side of the transaction. Overall the reforms will make it easier for the average borrower to comparison shop for a mortgage loan.

As advocates for the Home BUYER, one of the services we offer our clients is to help them evaluate lenders and loan options using our TOTAL Cost of the LoanSM system.

If you have excellent credit and will be buying a $300,000-$800,000 home within 90 days and would like an agent who will work exclusively for you, make sure you get an Agent on YOUR side of the transaction! Make sure you hire an E B A!

Call us at (801) 969-8989 or contact us via the link on this page.

Exclusive Buyers Agents do not list homes and never represent Sellers. They represent Buyers ONLY on the Buyer's side of the transaction. They work to get BUYERS the Best Price and Terms when they Buy...

©2009 Homebuyer Representation, Inc. - "The Real Estate Agents on the Buyer's Side" TM - Salt Lake City, UT

Exclusive Buyers Agents (EBA) - All Rights Reserved

Finally...

real estate agents on the buyers side

How to "Shop" Loans and Lenders Part 1 of 7 (How to Shop Mortgage Loan Series)

Mortgage MoneyMany Buyers pay 1-3% too much for their loan in up-front costs, even after "shopping" for lenders. Some choose a lender solely based on which one has the lowest up-front costs, but they end up paying for it by getting an interest rate that is higher than they qualify for. Others unnecessarily pay too much in fees in order to get the lowest interest rate.

Shopping for a loan does not have to be difficult or complicated. The key is to take control of the process, get organized, and make sure you do it right.

Here are some basics on ONE way to shop for a loan. Click each link for more information on each topic:

As advocates for the Home BUYER, one of the ways we protect our clients above and beyond what most traditional agents do is by offering to help them evaluate lenders and loan options using our TOTAL Cost of the LoanSM system.

If you have excellent credit and will be buying a $300,000-$800,000 home within 90 days and would like an agent who will work exclusively for you, make sure you get an Agent on YOUR side of the transaction! Make sure you hire an E B A!

Call us at (801) 969-8989 or contact us via the link on this page.

Exclusive Buyers Agents do not list homes and never represent Sellers. They represent Buyers ONLY on the Buyer's side of the transaction. They work to get BUYERS the Best Price and Terms when they Buy...

©2009 Homebuyer Representation, Inc. - "The Real Estate Agents on the Buyer's Side" TM - Salt Lake City, UT

Exclusive Buyers Agents (EBA) - All Rights Reserved

Finally...

real estate agents on the buyers side

How to "Shop" Loans and Lenders Part 2 of 7 (Same Day - Same Time)

Mortgage MoneyMany Buyers pay 1-3% too much for their loan in up-front costs, even after "shopping" for lenders. Some choose a lender solely based on which one has the lowest up-front costs, but they end up paying for it by getting an interest rate that is higher than they qualify for. Others unnecessarily pay too much in fees in order to get the lowest interest rate.

Shopping for a loan does not have to be difficult or complicated. The key is to take control of the process, get organized, and make sure you do it right.

Here are some basics on ONE way to shop for a loan. Click each link for more information on each topic:

As advocates for the Home BUYER, one of the ways we protect our clients above and beyond what most traditional agents do is by offering to help them evaluate lenders and loan options using our TOTAL Cost of the LoanSM system.

If you have excellent credit and will be buying a $300,000-$800,000 home within 90 days and would like an agent who will work exclusively for you, make sure you get an Agent on YOUR side of the transaction! Make sure you hire an E B A!

Call us at (801) 969-8989 or contact us via the link on this page.

Exclusive Buyers Agents do not list homes and never represent Sellers. They represent Buyers ONLY on the Buyer's side of the transaction. They work to get BUYERS the Best Price and Terms when they Buy...

©2009 Homebuyer Representation, Inc. - "The Real Estate Agents on the Buyer's Side" TM - Salt Lake City, UT

Exclusive Buyers Agents (EBA) - All Rights Reserved

Finally...

real estate agents on the buyers side

How to "Shop" Loans and Lenders Part 3 of 7 (Same Facts)

Mortgage MoneyMany Buyers pay 1-3% too much for their loan in up-front costs, even after "shopping" for lenders. Some choose a lender solely based on which one has the lowest up-front costs, but they end up paying for it by getting an interest rate that is higher than they qualify for. Others unnecessarily pay too much in fees in order to get the lowest interest rate.

Shopping for a loan does not have to be difficult or complicated. The key is to take control of the process, get organized, and make sure you do it right.

Here are some basics on ONE way to shop for a loan. Click each link for more information on each topic:

  • Shop the lenders on the same day and at the same time
  • Make sure all the lenders have the same facts in order to make an apples-to-apples comparison

    • These facts include:
    • Same Purchase Price
    • Same Down Payment (And therefore the same Loan Amount)
    • Same Loan Type (FHA, VA, Conventional, Other)
    • Same Loan Term (30 Year, 15 Year, other)
    • Same "Points" (We usually recommend having them all quote you with "No Points")
    • Length of the "Lock" (30-45 days is standard. Sometimes you can get a better rate with an even shorter closing date and lock)
    • Same Credit Score and Debt Ratio Assumptions
    • etc. etc.

    What do you really want out of "shopping" your loan? The lowest rate? The lowest fees? Most Buyers fixate on one of these and when a lender figures out which one, they get that part of the loan as low as possible by moving things elsewhere in the equation.

    Lenders should know that you are shopping for both the lowest rate AND the lowest fees. Neither is most important to you. The total cost of the loan (fees AND rate) will be considered.

    What the Buyer really wants to do is save the most money while they hold the loan. Up front AND over the long haul.

  • Figure out the TOTAL Cost of the LoanSM
  • Don't skip the "shopping" even if you have a "friend" in the business or a "company special"
  • Ask for References!
  • A few extras

As advocates for the Home BUYER, one of the ways we protect our clients above and beyond what most traditional agents do is by offering to help them evaluate lenders and loan options using our TOTAL Cost of the LoanSM system.

If you have excellent credit and will be buying a $300,000-$800,000 home within 90 days and would like an agent who will work exclusively for you, make sure you get an Agent on YOUR side of the transaction! Make sure you hire an E B A!

Call us at (801) 969-8989 or contact us via the link on this page.

Exclusive Buyers Agents do not list homes and never represent Sellers. They represent Buyers ONLY on the Buyer's side of the transaction. They work to get BUYERS the Best Price and Terms when they Buy...

©2009 Homebuyer Representation, Inc. - "The Real Estate Agents on the Buyer's Side" TM - Salt Lake City, UT

Exclusive Buyers Agents (EBA) - All Rights Reserved

Finally...

real estate agents on the buyers side