In previous articles, we discussed loan pre-approval and pre-qualification, which occur when a borrower makes a loan application. The big takeaway from this process will ultimately be a “Good Faith Estimate” or (GFE). This is a form that details the basic information about the terms of the loan for which you have applied as well as a breakdown of the estimated costs associated with acquiring that loan.
The Good Faith Estimate is a requirement of the Real Estate Settlement Procedures Act (RESPA). The idea behind the GFE is to give the borrower a way to compare costs between lenders. The lender is required to provide you with a GFE within three business days of completing the loan application.
There is a catch though, in order to have a completed loan application, the lender needs a property address. Since you are in the pre-approval stage, you probably won’t have a property address yet. In this case, you can get something from the lender called a “fee sheet” this is a cost breakdown, similar to the GFE. The fee sheet is essentially a rough draft of the Good Faith Estimate. Fee sheets are an easier way to comparison shop without a specific property address.
Once you do have a property under contract, make sure the lender provides you with a “Good Faith Estimate” within 3 days of application. It’s a good idea to share the Good Faith Estimate with your Realtor, they should be able to explain what the fees are for and which ones are appropriate.