Good Faith Estimate

AAA

DEFINITION of 'Good Faith Estimate'

An estimate of the fees due at closing for a mortgage loan that must be provided by a lender to a borrower within three days of the lender taking a borrower's loan application. A good faith estimate is required by the Real Estate Settlement Procedures Act (RESPA). While the form of the estimate is standardized across the industry to allow borrowers to compare costs between lenders, it is key to note that it is only an estimate, and the true figure can sometimes be different.

INVESTOPEDIA EXPLAINS 'Good Faith Estimate'

Consumers should beware of unscrupulous lenders who add their own "junk" fees and/or charge excessive fees for items such as wire transfers. However, there are legitimate reasons for discrepancies between the good faith estimate and the actual cost. For example, the lender may not know all the costs of closing services provided by third parties.

A thorough comparison of mortgages between lenders by a consumer will include a comparison of items such as loan origination fees and loan discounts, which are generally a tradeoff for a higher or lower interest rate.

RELATED TERMS
  1. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  2. Imputed Value

    The value of an item for which actual values are not available. ...
  3. Pro-Forma Invoice

    A preliminary bill of sale sent to buyers in advance of a shipment ...
  4. Garbage Fees

    Unnecessary fees tacked onto mortgage closing costs by lenders ...
  5. Mortgage Broker

    An intermediary who brings mortgage borrowers and mortgage lenders ...
  6. Closing Costs

    The expenses, over and above the price of the property that buyers ...
RELATED FAQS
  1. What are key government regulations that affect investing in the banking sector?

    In the aftermath of the global financial crisis of 2008, the banking sector in the United States became subject to a number ... Read Full Answer >>
  2. What factors should I consider when shopping for the best mortgage lender?

    Mortgage lenders offer a variety of loan products tailored to specific borrower needs and qualifications. Lenders calculate ... Read Full Answer >>
  3. Are good faith estimates (GFEs) accurate?

    Historically, consumers shopping for a home loan were unable to rely on the lender's good faith estimate to disclose lending ... Read Full Answer >>
  4. What is the difference between "closed end credit" and a "line of credit?"

    Depending on the need, an individual or business may take out a form of credit that is either open- or closed-ended. While ... Read Full Answer >>
  5. In what instances does a business use closed end credit?

    The most common types of closed-end credit used by both businesses and individuals are mortgages and auto loans. Businesses ... Read Full Answer >>
  6. What are the long-term effects of delinquent accounts?

    Delinquency occurs when borrowers fail to make payments on their loans. All loan borrowers should do their best to avoid ... Read Full Answer >>
Related Articles
  1. Credit & Loans

    4 Steps To Attaining A Mortgage

    It starts with knowing your choices as well as your price range. We show you how to get there.
  2. Insurance

    10 Hurdles To Closing On A New Home

    It's the biggest purchase of your life - find out what can go wrong before you even close the deal.
  3. Personal Finance

    Understanding Your Mortgage

    We walk through the steps needed to secure the best loan to finance the purchase of your home.
  4. Home & Auto

    How the Fed Affects Reverse Mortgages

    An in depth look at how the Federal Reserve affects reverse mortgages.
  5. Investing

    Where Are Real Estate Stocks Heading?

    We summarize five economic reports that investors should monitor monthly to keep them informed of where real estate and its related stocks are heading.
  6. Home & Auto

    Protect Yourself Against Reverse Mortgage Scams

    You could lose not only money, but also your home, if you fall for these schemes.
  7. Home & Auto

    Find a Reverse Mortgage Lender You Can Trust

    Reverse mortgages are a notorious lending market. Follow these steps and the chances are good you’ll find a trustworthy, competent lender.
  8. Home & Auto

    Do You Qualify for a Reverse Mortgage?

    See whether you meet the age qualifications and other requirements for getting a reverse mortgage.
  9. Home & Auto

    Reverse Mortgages and Your Taxes

    It pays to know the tax benefits from getting a reverse mortgage. Two major considerations: Are the proceeds taxable and is the interest tax deductible?
  10. Credit & Loans

    How to Pick the Right Online Mortgage Lender

    Here are the best tactics to help successfully navigate choosing the right online mortgage lender.

You May Also Like

Hot Definitions
  1. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  2. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  3. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  4. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
  5. Grandfathered Activities

    Nonbank activities, some of which would normally not be permissible for bank holding companies and foreign banks in the United ...
  6. Touchline

    The highest price that a buyer of a particular security is willing to pay and the lowest price at which a seller is willing ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!