A good faith estimate is a written estimate you are supposed to receive within 3 days of making a mortgage application. The good faith estimate breaks down individual costs involved in a refinancing or purchase mortgage.
There are many line items to reflect all of the parties that may be involved in a transaction, including:
-lender
-broker
-escrow company
-title company
-hazard insurance company
-appraiser
-government fees
-taxes
-other fees
Your fees come in several forms:
-current fees
-prepayment of taxes, interest, and other items (this is a "fee" in the sense that it costs you but it is just a prepayment of future expenses you will incur anyways)
When a lender or broker prepares a good faith estimate there is the temptation to show a lower fee structure by skipping over many of these costs. In this way they can show that they are cheaper than the competition. Many people who don't know how to read good faith estimates for accuracy but just jump to the sum total at the bottom to compare estimates.
A lowball good faith estimate is not something to use to compare with other offers. One way to quickly see if the good faith estimate is worth it is to see if is mostly empty.
If there is nothing estimated for property taxes, appraisal fees, or other inevitable charges then there may be something missing in the good faith estimate.
Changes in Final Fees From The Original Good Faith Estimate
No matter how much you compare your good faith estimates and carefully choose your loan, your fees in the end may be different.
There are legitimate and illegitimate reasons for this. An illegitimate reason is that you were deliberately lowballed. A small amount of this may be understandable.
There are also many legitimate reasons why your fees may end up changing. If your credit score drops during the mortgage process the lender may end up charging you more for the loan.
If you miss a mortgage payment during the mortgage loan process, and the new lender finds out, they may change the loan they offer you and its fee structure may be different. You may have a prepayment penalty that the lender didn't know about when creating the good faith estimate.
Remember that many of the costs on the good faith estimate will be incurred regardless of which lender you go to (such as appraisal and credit report fees).
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