A good faith estimate is a document that a mortgage lender provides to a loan applicant that includes details of the loan terms and an estimate of settlement charges, according to the Consumer Finance Protection Bureau. Mortgage lenders were required to supply good faith estimate forms to borrowers who applied for most types of mortgages before October 3, 2015. The loan estimate form replaces the good faith estimate for loan applications after that date.Continue Reading
A good faith estimate helps borrowers understand loan terms and compare the costs of mortgages so they can make informed decisions, says the Consumer Finance Protection Bureau. The form explains the costs associated with a loan, such as the interest rate, number of payments, origination fees, title insurance, transfer taxes and recording fees. Lenders were required to issue a good faith estimate within three days of receiving an application. Although the lender may charge a credit report fee, the good faith estimate is not a commitment to borrow, and home buyers are free to continue shopping for a mortgage.
The loan estimate form includes similar loan details such as the estimated interest rate, monthly payment and total closing costs for the loan. This form also simplifies some of the loan terms to make them easier for borrowers to understand.Learn more about Credit & Lending