As a Real Estate Loan Borrower, one of the most important documents to pay attention to is the Good Faith Estimate of Closing Costs. This document will help you understand exactly what you are paying for, how much is being paid to whom, and can save you big bucks in negotiating with your Lender. I am going to show you what to look for so that you feel confident that you are receiving the full facts about the cost of your new mortgage loan.
First of all, the Good Faith Estimate (GFE) of Closing Costs is just that. An estimate of costs. However, the fees disclosed should be very close to what the final numbers are at the end of the transaction as disclosed in the HUD-1 form. Figures that may change from the GFE will be items that are “Prepaid” (#900 thru #1005 on GFE form) such as mortgage interest, insurance premiums, impound account amounts for property taxes and mortgage insurance. These prepaid item calculations are made based on the closing date of the transaction. Therefore, if the closing date changes, then these prepaid item amounts will also change.
Items 800 and 801 on the GFE cover Lender “Points” aka Loan Origination Fee or Discount. A Point is 1% of the loan amount. So if the new loan request is for $200,000 and the quote is for a rate of 5.5% at 1 Point Origination Fee, then the Lender will make $2,000 on the transaction.
There may also be an additional disclosure of “Yield Spread Premium” or a “Service Release Premium” which is paid by the Lender to the Broker for originating a loan. This is the equivalent of the “Manufacturer’s Rebate”. And you need to know how to spot it. This fee is how Lenders make their money on a Zero Points loan. This Yield Spread Premium is paid to the Loan Agent by the Lender in certain situations. Important! It is not disclosed by a number item on the GFE but rather as a line item towards the end of the GFE under the heading “Compensation to Broker”.
The GFE is required by law to be issued to you within 3 business days of applying for your loan. It is important to understand that the GFE does NOT guarantee or “lock-in” the interest rate quoted. The HUD-1 form is issued at closing and should match up with the GFE except for prepaid items as explained above.
Subscribe to:
Post Comments (Atom)
Find blank and fillable GFE forms at PDFfiller.
ReplyDeletehttp://goo.gl/uM4Ruh
You can fill the text fields, add a variety of checkmarks, digitally sign the form and even add pictures. After your PDF form is completed, it can be printed, emailed, faxed or saved on your computer. You can even send fillable PDF forms to your customers, employees, vendors and partners.