Good Faith Estimate

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.

BREAKING DOWN '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. Real Estate Settlement Procedures ...

    This act was designed to protect potential homeowners and enable ...
  2. Temporary Lender

    A mortgage lender that sells the loans it originates into the ...
  3. Dual Apper

    A potential mortgage borrower who submits two mortgage applications ...
  4. Lender

    Someone who makes funds available to another with the expectation ...
  5. Origination Fee

    An up-front fee charged by a lender for processing a new loan ...
  6. Loan Application Fee

    A fee charged to process an application for a loan, such as a ...
Related Articles
  1. Credit & Loans

    How To Pick The Right Lender When Refinancing A Mortgage

    Refinancing your mortgage has never been easier with the range of lenders and access to information that are available to you.
  2. Home & Auto

    How to Lower Refinance Closing Costs

    Refinancing a mortgage can save you money but it isn't free. There are closing costs associated with a refinance and how much you pay for them depends on you.
  3. Credit & Loans

    What Does a Lender Do?

    A lender provides funds to another with the expectation those funds will be repaid with interest.
  4. Credit & Loans

    Top 10 Common Mortgage Scams To Avoid

    How do you know which companies to avoid? Look for these telltale signs.
  5. Home & Auto

    How To Negotiate Your Closing Costs

    Closing costs can't be avoided altogether, but you can lower them. While there are a lot of fixed costs, there are also variable ones you can save on.
  6. Credit & Loans

    Mortgage Fees That Can Trash Your Refinance Deal

    Before deciding that refinancing your mortgage at a lower interest rate is a good deal, factor all the fees into your calculations.
  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

    Homebuyers' Walkthrough: Obtaining A Mortgage

    A mortgage is a pledge of real property as security for the payment of money, and today's homebuyers have a variety of options in terms of lenders and loan types. Obtaining a mortgage can be ...
  9. Credit & Loans

    How To Shop For Mortgage Rates

    Take these 5 steps to getting the lowest possible rate for your mortgage. Small percentage differences can mean big savings down the line.
  10. Credit & Loans

    Tips for Choosing the Best Online Mortgage Lender

    Finding the right online mortgage lender can be a tall task. Here's some help on how to avoid wasting your time.
RELATED FAQS
  1. Are good faith estimates (GFEs) accurate?

    Learn how federal guidelines regarding good faith estimates protect consumers under the revised 2010 version of the Real ... Read Answer >>
  2. What’s the difference between a mortgage lender and a mortgage servicer?

    Buying a home is an exciting and confusing process. Once the loan is secured, it's important to know who gets the payment: ... Read Answer >>
  3. What factors should I consider when shopping for the best mortgage lender?

    Comparing lenders to obtain the best mortgage loan requires research and willingness to shop around for the best loan to ... Read Answer >>
  4. What is the key to finding your ideal mortgage?

    Learn what steps you need to take in order to locate the perfect mortgage for your budget, lifestyle and long-term financial ... Read Answer >>
  5. What is the 1003 mortgage application form?

    Learn about the 1003 mortgage application form, what information it requires and why this form is the industry standard for ... Read Answer >>
  6. Does inflation favor lenders or borrowers?

    Find out under what circumstances inflation benefits borrowers more than lenders and in which situations inflation can be ... Read Answer >>
Hot Definitions
  1. Goodwill

    An account that can be found in the assets portion of a company's balance sheet. Goodwill can often arise when one company ...
  2. Return On Invested Capital - ROIC

    A calculation used to assess a company's efficiency at allocating the capital under its control to profitable investments. ...
  3. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  4. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  5. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  6. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
Trading Center