Closing Costs
A Good Faith Estimate (GFE) is a disclosure of the settlement charges likely to be
incurred at closing. It's required under a law called the Real Estate Settlement
Procedures Act. On the GFE you'll see a listing of the interest rate, term, loan amount
and all the charges and fees you can expect to pay at closing.
How accurate is it? - Some people jokingly refer to it as a "Good Faith Guesstimate."
There are a lot of variables that can change the amount you expect to pay at closing to
what you actually do pay, so do take the time to read it through.
Here are some tips to help you get the most accurate estimate:
A recent HUD/Federal Reserve study notes that "Consumers report many instances in
which the costs disclosed on the GFE were significantly lower than those actually
charged at closing. They also report cases in which some fees charged at closing were
completely left off the GFE." There is no legal liability for errors on the GFE.
Commissions for every officer, agent and broker who has touched your transaction can
be culprits as well as obscure differences between "rates" and "fees."
What can you do to be completely prepared at closing? - Do your homework—it could
save you thousands of dollars. If you are not using a Professional Mortgage Consultant
you can end up with large fees and a very different loan than what you originally thought
you were getting. I have seen people go to a lender for a loan and when they finally
made it to closing on their new home purchase the deal was changed completely and
required the borrowers to bring an extra $5000 to the closing. This lender has been in
the news recently and paid a $300 million fine for predatory lending practices, but there
are still several lenders out there that act in the same manner. I urge you to do your
homework and never give out your private information to someone over the phone or on
the internet unless you have a prior relationship with them.
We only work with people that we can meet face to face, unless you are referred to us by
another client or trusted advisor, to ensure that you are treated in the same manner that
any Trusted Advisor would treat their client. As a Certified Mortgage Planning Specialist I
believe that you are much more than a one time transaction and will strive to be your
Mortgage Advisor for life. Steve Felt
www.FeltFinancial.com 2006 All rights reserved
incurred at closing. It's required under a law called the Real Estate Settlement
Procedures Act. On the GFE you'll see a listing of the interest rate, term, loan amount
and all the charges and fees you can expect to pay at closing.
How accurate is it? - Some people jokingly refer to it as a "Good Faith Guesstimate."
There are a lot of variables that can change the amount you expect to pay at closing to
what you actually do pay, so do take the time to read it through.
Here are some tips to help you get the most accurate estimate:
- Check the Loan Officer for expertise and experience; ask how long they have
been in the business and if they are a CMPS, CMB or CRMS. These
designations are awarded to experienced Loan Officers that pass several
competency exams after required educational course work. After all you wouldn't
go to someone for medical advice that doesn't have the MD after their name. - The rates and APR shown are for the day the estimate was generated. If you
haven't "locked" your rate, these figures can change dramatically. - If your estimate was generated many months earlier than your expected
settlement date, charges can change significantly. - Hazard insurance premiums (homeowners insurance) and government fees
such as property taxes are among the most likely to be inaccurate in the Good
Faith Estimate as they are not offered directly by the bank offering you a loan.
Check with your county courthouse for actual property taxes you can expect to
pay, and contact an insurance agent to determine what your homeowners
insurance should cost (you'll usually be expected to pay for a full year up front at
closing). Your Mortgage Consultant should have a list of good agents for you to
contact. - Account for prepaid interest in your calculations—you'll prepay interest for the
number of days between your loan closing date and the beginning of the
following month. - Discuss with a title company that works with your lender what fees you can
expect to pay at closing and question them when you see them on the GFE. - Rule of thumb: Closing costs typically amount to between 3 and 5 percent of the
sale price.
A recent HUD/Federal Reserve study notes that "Consumers report many instances in
which the costs disclosed on the GFE were significantly lower than those actually
charged at closing. They also report cases in which some fees charged at closing were
completely left off the GFE." There is no legal liability for errors on the GFE.
Commissions for every officer, agent and broker who has touched your transaction can
be culprits as well as obscure differences between "rates" and "fees."
What can you do to be completely prepared at closing? - Do your homework—it could
save you thousands of dollars. If you are not using a Professional Mortgage Consultant
you can end up with large fees and a very different loan than what you originally thought
you were getting. I have seen people go to a lender for a loan and when they finally
made it to closing on their new home purchase the deal was changed completely and
required the borrowers to bring an extra $5000 to the closing. This lender has been in
the news recently and paid a $300 million fine for predatory lending practices, but there
are still several lenders out there that act in the same manner. I urge you to do your
homework and never give out your private information to someone over the phone or on
the internet unless you have a prior relationship with them.
We only work with people that we can meet face to face, unless you are referred to us by
another client or trusted advisor, to ensure that you are treated in the same manner that
any Trusted Advisor would treat their client. As a Certified Mortgage Planning Specialist I
believe that you are much more than a one time transaction and will strive to be your
Mortgage Advisor for life. Steve Felt
www.FeltFinancial.com 2006 All rights reserved
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