Not all Mortgages are in Good Faith!

The new Good Faith Estimate (GFE) form is supposed to make it easier for borrowers to shop around for a mortgage by clearly spelling out what a lender will charge in fees and interest. However, you can still end up paying more than you expect if you’re not careful.

In fact, what you think is a GFE may not be a GFE at all. In some cases, lenders have been reported to offer potential borrowers informal worksheets that resemble a GFE, but are not legally binding and have terms that can be significantly altered before closing.


Here’s how it works: when you apply for a mortgage, the lender is required to provide you with a GFE within three days. The GFE spells out the terms the lender is offering, including the interest rate, any fees charged by the lender and fees charged by third parties for settlement costs, such as closing services and title insurance.

The lender is required to honor those terms if the borrower accepts them within a certain period of time spelled out in the GFE. What the new GFI, which went into use Jan. 1, does is consolidate what had been lots of different charges into clearly identifiable categories – lender fees, interest rates, third-party fees – to make it easier to compare loan terms offered by different lenders.


GFE does not commit you to one lender

A lender cannot demand a loan commitment from a borrower in return for a GFE; the purpose of the GFE is to enable the borrower to compare terms offered by different lenders.

A few important things to note about the GFE. The interest rate offered on the GFE may only be good for a matter of hours; the offer is not fixed until you lock it in for a specific period of time, say 30 or 45 days. You’ll need to pay to do this.