What does "Good Faith Estimate" mean?

Definition

The Good Faith Estimate was a form that gave borrowers an estimate of their mortgage costs. It was replaced by the Loan Estimate form in 2015.

Understanding the GFE Moment

The Good Faith Estimate appears early in the mortgage process. It helps borrowers understand potential loan costs. In simple terms, it provides an itemized list of estimated fees. Example: If you're borrowing $200,000, the GFE might show estimated closing costs of $4,000. It gives a clearer view of what to expect financially. It's not a final bill or binding agreement. The actual costs can vary at closing. It's a snapshot, not a guarantee, designed to inform and prepare, not to commit or finalize terms.

People Want To Know

What are the rules of a GFE?

The Good Faith Estimate (GFE) outlined estimated costs associated with a mortgage, including loan origination fees, title insurance, and other closing costs. Lenders were required to provide the GFE within three business days of receiving a loan application. Estimates had to be reasonably accurate, with certain fees not exceeding the amounts disclosed in the GFE by more than 10% at closing. The GFE was replaced by the Loan Estimate form in 2015.

How accurate is a Good Faith Estimate?

The Good Faith Estimate provided an estimated cost of a mortgage but was not always accurate. Borrowers could expect variations in costs, often by 10% or more, depending on changes in fees, interest rates, or loan terms before closing. It was replaced by the Loan Estimate in 2015, which offers more precise estimates.

Flip the Script - Master mortgage objections

More From The Mortgage Glossary

Government recording charges

Government recording charges are fees paid to local and state governments to record the legal documents of a home sale, such as the deed and mortgage.

Higher-priced mortgage loan

A higher-priced mortgage loan is a mortgage where the APR is significantly higher than the average rate for a similar loan. These loans are subject to special regulatory requirements and are typically offered to borrowers with a higher risk profile.

Home equity line of credit (HELOC)

A HELOC, or home equity line of credit, allows you to borrow against your home's equity as needed. It works like a credit card, giving you a line of credit you can draw from during a set period, and it uses your home as collateral.