Good Faith Estimate Law and Legal Definition
A Good Faith Estimate provides the borrower with the information needed to shop for a loan effectively. A Good Faith Estimate sets out all the costs associated with the mortgage, and often experts recommend seeing it before committing to a loan. When a person applies for a mortgage, the government requires the lender to give a 'Good Faith Estimate' within three days of the application. A Good Faith Estimate helps to compare the real costs of competing mortgage offers. It may be tricky if different lenders list the same costs in different way, or if the same costs are incomplete or inaccurate.
A Good Faith Estimate covers every expense associated with a home loan, including interest rate and discount points, lender's fees, title and transfer charges, prepaid interest, insurance, and expected increase in fees. A person can protect himself/herself from nasty surprises by asking the lender to 'lock in' its fees. Along with the Good Faith Estimate, the lender also provides a Truth in Lending disclosure form which gives the Annual Percentage Rate on the mortgage.