Good Faith Estimate
What Is a Good Faith Estimate?
A Good Faith Estimate (GFE) was a standardized document that provided borrowers with an estimate of the costs associated with a mortgage loan, including interest rates, fees, and closing costs. It has largely been replaced by the Loan Estimate under current regulations.
Why It Matters
Understanding the concept of a Good Faith Estimate helps borrowers compare loan offers and anticipate total borrowing costs. It promotes transparency in lending and protects consumers from unexpected fees.
How a Good Faith Estimate Works
Historically, the GFE included:
- loan terms and interest rate
- estimated monthly payments
- itemized closing costs
- lender fees and third-party costs
- total estimated cash needed at closing
Today, the Loan Estimate serves this same purpose with updated disclosures.
Example
A borrower receives a Good Faith Estimate showing estimated closing costs of $8,000 before finalizing a mortgage.
Good Faith Estimate vs Loan Estimate
- Good Faith Estimate is the older disclosure form.
- Loan Estimate is the current standardized form required by law.
FAQs About Good Faith Estimate
Is the GFE still used today?
No, it has been replaced by the Loan Estimate.
Are estimates accurate?
They are estimates, but regulated for accuracy.
Why was it replaced?
To improve clarity and consumer protection.
Related Terms
