A good faith estimate must be provided by a mortgage lender or broker in the United States to a customer, as required by the Real Estate Settlement Procedures Act (RESPA). The estimate must include an itemized list of fees and costs associated with your loan and must be provided within three business days of applying for a loan.
These mortgage fees, also called settlement costs or closing costs, cover every expense associated with a home loan, including inspections, title insurance, taxes and other charges.
A good faith estimate is a standard form which is intended to be used to compare different offers (or quotes) from different lenders or brokers.
The good faith estimate is only an estimate. The final closing costs may be different – sometimes very different.
Fees and Charges
The fees included within a good faith estimate fall into six basic categories:
- Loan fees
- Fees to be paid in advance
- Reserves
- Title charges
- Government charges
- Additional charges
The following is a list of the typical charges. Each charge starts with a number – the same number is the number of the charge on a HUD-1 Real Estate Settlement Statement. This makes it easier to compare the charges you are looking for on your good faith estimate to the HUD-1.
800 ITEMS PAYABLE IN CONNECTION WITH LOAN:
- 801 - Loan Origination Fee
This fee is a charge for originating or creating the loan
This is an upfront charge paid to the lender to get a lower mortgage rate – the same as “buying the rate down”
This is the cost of the independent appraisal. It is usually paid by the buyer.
This is the cost of the credit report
- 805 - Lender's Inspection Fee
This is the lender’s cost of inspecting a property – some may double check the appraisal provided by an independent appraiser
- 808 - Mortgage Broker Fee
This is the upfront charge that a mortgage broker charges. Brokers can also earn a “rebate” from the lender which is not listed here
- 809 - Tax Related Service Fee
Lender fee, usually small, for handling tax related matters
This is the charge for processing the loan – collecting your application, running credit, collecting pay stubs, bank statements, ordering appraisal, title, etc.
This is the cost of the loan underwriter (approver)
This is the cost of wiring the money around, which is usually done by escrow.
900 ITEMS REQUIRED BY LENDER TO BE PAID IN ADVANCE
This is your prepaid interest for your mortgage loan.
- 902 - Mortgage Insurance Premium
This is the prepaid mortgage insurance premium, if you have one. This is the insurance premium some lenders charge for loans with little equity.
- 903 - Hazard Insurance Premium
This is your home’s hazard insurance being prepaid.
This is the Veterans Administration funding fee, which is something you will not incur unless you go through a VA program.
1000 RESERVES DEPOSITED WITH LENDER
- 1001 - Hazard Insurance Premiums # months @ $ per month
This is any prepayment of your future hazard insurance expense
- 1002 - Mortgage Ins. Premium Reserves months @ $ per month
This is any prepayment of your future mortgage insurance expense
- 1003 - School Tax months @ $ per month
This is any prepayment of your future school tax expense
- 1004 - Taxes and Assessment Reserves months @ $ per month
This is any prepayment of your future tax expenses, such as property taxes
- 1005 - Flood Insurance Reserves months @ $ per month months
This is any prepayment of your future flood insurance expense
- 1008 - Aggregate Accounting Adjustment
This is a credit to the buyer. By law, the lender is not allowed to collect more than the sum of initial payments for reserve items. The aggregate adjustment is the amount the lender must 'credit' the borrower at closing, so that they don't collect more than the law allows.[1]
1100 TITLE CHARGES
- 1101 - Closing or Escrow Fee
This is the cost of escrow. This is the service of a neutral party that actually handles the money between all the different parties in a real estate transaction, including: the lender, the buyer, the seller, the agents, notary, etc. This is often done by the “Title Company” – a related entity in the same office that provides title insurance
- 1105 - Document Preparation Fee
This is the charge for preparing the loan documents. Lenders often email the loan documents to the escrow company, which in turn prints them out and reviews them before signing
This is the cost of the notary. This is to have all of the legal documents surrounding this transaction notarized
Any legal charges
This is the cost of insuring the title of the property. If there is a question about title (who really owned the property), after the transaction is done then this insurance protects the lender from future problems
1200 GOVERNMENT RECORDING & TRANSFER CHARGES
This is the cost of updating relevant government records
- 1202 - City/County Tax/Stamps
Unavoidable government charge
Unavoidable government charge
1300 ADDITIONAL SETTLEMENT CHARGES
This is the cost of the pest inspector. Their purpose is to document the state of the property that the lender is making the loan on.
See also
References
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