If you are going to borrow to purchase a home, one of the things you should keep in mind is the total of closing fees, which a lender has to inform you about ahead of time.
This Good Faith Estimate gives all of the fees that will be charged to the borrower when the home loan closes.
The problem with these estimates is that each bank uses their own form, so it may be difficult to compare the costs.
This kind of thing makes it hard for the borrower to learn what he is paying for.
When you receive your GFE, you will have the opportunity to examine these costs in the “Total Estimated Funds Needed to Close” section. This should list the costs you will be expected to cover at the closing.
The biggest cost in the statement will be the loan origination fee. Some very competitive lenders may charge a flat fee, but the rest charge a percentage of the loan, between .5% and 2 %. With a large number such as this, most home buyers would like to make sure that the charges are right ahead of time.
The appraisal fee is one of the first charges, and of course, the lender does have to have an appraisal. But you can make sure that their charges are reasonable by comparing it to other appraisal companies. That is what you have the three days for.
The borrower should review the processing fee. This fee represents the labor the bank puts into the loan to get and go over the information. Often these items may be listed line by line as administration, copying, etc. This is an area in which the borrower may be able to negotiate lower rates.
The lender will list an underwriting fee. This is the fee charged by the bank to review documents to assess the loan, such the credit history and salary information of the borrower. This is the kind of information that determines whether or not the loan will be granted.
Next, look at the title fees and attorney’s costs. These can frequently be reduced by using your own attorney.
Review the mortgage broker’s fee, if you are paying the commission. (If there is no commission listed, this means the lender is paying it.) There is a possibility that you can lower this rate.
There are some fees that are prorated costs related to the home. For example, insurance and taxes already paid by the seller will have to be reimbursed by the buyer out of the sales price.
Some banks put a whole slew of fees under a miscellaneous section. You can ask for an itemized list of these fees. The total of the fees listed on the GFE should be fairly accurate. If you get any changes or reductions agreed to, be sure you receive a new estimate, in writing.
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