What is a Good Faith calculate?
In real estate, the good faith calculate is the standard from that is to be used to compare different quotes or offers from different brokers or lenders. Since it is only an calculate, the final closing costs may be different or very different.
This is widely used by the mortgage industry to show borrowers an calculate of the total costs of closing they will incur. The GFE can only assist in calculating your lender in terms of fees they charge and interest rates they offer. The items on a GFE can be divided into three major groups such as the interest rate and points, fixed-dollar loan fees and third-party charges. A dishonest loan company could manipulate these figures. There is no legal liability for errors on a GFE.
The Federal law requires brokers and lenders to provide a written good faith calculate within three days after accepting a loan application. The GFE contains some letters at the end of line 800 like a PFC, S, F, and POC. PFC method Pre-paid finance charge that is associated with calculating the APR. The S method Seller paid and items that the seller will pay at closing. F is the FHA allowable; the FHA permits these. Lastly, the POC is for Paid Outside of Close. This method that items will be paid for before closing. Some shared items to be paid outside of closing are appraisal fees, homeowner’s association dues and homeowners insurance. In some GFE’s, these letters may simply be filled in after the dollar amounts of each fee.
It is necessary to keep a copy of the original GFE that is shown to you by the lender to compare it to the final closing statement before signing your loan documents. There are several important items in the GFE and they are the following:
1. The most important part of the GFE is Section 800. This includes Items Payable in Connection with the Loan. These are fees that the lender charges and the money that they will collect. Included an calculate of the third party appraisal fees and the money here goes to the appraiser and not the lender. The remaining section contains other information vital to your borrowing course of action and remains continued in spite of of your choice of lender.
2. The Section 900 are Items Required by Lender to be paid in improvement. This includes prepaid interest and homeowner’s insurance. You will be required to pay the first year’s premium on insurance before closing if you are buying a home. If you are refinancing, you will most likely prepay three months of insurance during closing.
3. Section 1000 is the Reserves Deposited with the Lender. These are funds required by the lender to be paid during closing. If you plan to escrow your insurance and taxes, you will pay several months’ taxes at closing depending on the state where the character is located and well as when the taxes are collected and a number of month’s insurance.
4. Section 1100 or Title Charges. Title fees are determined by a title company and could include closing or escrow fees, notary fees, document preparation, title insurance, attorney fees, endorsement and exam fees.
5. Section 1200. Government Recording and move Charges. Government move and recording fees are paid to a particular state. These could include tax stamps, recording fees, documentary stamps and intangible taxes. Some states may have additional charges.
6. Section 1300 or the Additional Settlement Charges. It is an additional settlement charges that includes termite or pest inspections, surveys and other costs not covered in other sections.
Have a mortgage expert go over the GFE with you. Try to compare items line by line. If you notice a cost of any item that is, remarkably higher or lower than that of the same item on other GFE’s, ask the loan officer to explain the difference.