What Is a Good Faith Estimate (GFE)?
A good faith estimate (GFE) is a document that outlines the estimated costs and terms of a reverse mortgage loan offer, enabling borrowers to comparison shop among different lenders and choose the deal that best fits their needs.
Under the Real Estate Settlement Procedures Act (RESPA), lenders were required to provide consumers with GFEs within three days of a regular mortgage application. Then, in October 2015, GFEs were only made applicable to people seeking reverse mortgages, with loan estimate forms being introduced for other types of home loans.
Key Takeaways
- A good faith estimate (GFE) details a fair assessment of the expected fees, costs, and terms associated with a potential mortgage.
- GFEs now only apply to reverse mortgages, with similar loan estimate formsbeing introduced for other home loans.
- Borrowers must be provided with GFEs within three business days of their application.
- It's possible to shop around and acquire multiple estimates before choosing a loan or a lender.
- The costs noted on the form are only estimates and may not always prove to be accurate.
How a Good Faith Estimate (GFE) Works
A GFE makes it possible to compare offers from various lenders and brokers. Once the document is received, borrowers can examine the breakdowns and contract terms and then indicate if they wish to proceed with the mortgage loan from that particular financial institution.
The form is written inclear language to help consumers better understand the terms of the mortgage for which they are applying and borrowers may shop around and acquire multiple estimates before choosing a loan or a lender.
Since October 2015, GFEs now only apply to reverse mortgages: loans that enable seniors aged 62 and older to convert their home equity into lump-sum amounts, fixed payments, or lines of credit (LOCs).
The bank or financial institution must provide the homeowner seeking a reverse mortgage with a GFE within three business days of receiving their application. This form includes a breakdown of all the costs associated with the loan, such as taxes, title charges, closing costs, and administrative fees, as well as any other terms and conditions of the loan, including policies regarding payback.
The official standardized estimate forms provide information about the approximated costs of taxes and insurance and how the interest rate and payments may change in the future. Borrowers may be charged a credit report fee before receiving a GFE but cannot be charged any additional fees to acquire the document.
Limitations of a Good Faith Estimate (GFE)
The costs noted on the form are only estimates and merely provide a rough idea of how much borrowers may be expected to spend in order to get the loan and what's expected of them before and after the loan comes due. The actual costs might ultimately be higher or lower when everything is finalized.
There are legitimate reasons for discrepancies between the GFE and the actual closing costs. The lender may not know all the costs of closing services provided by third parties, which may be considered the hidden costs of owning a home.
Good Faith Estimates (GFE) vs. Loan Estimate Forms
As noted above, GFEs now only apply to reverse mortgages. They were replaced with loan estimate forms after October 2015 for anyone seeking other types of mortgages.
Loan estimates, like GFEs, are an industry standard. They must be provided to mortgage applicants within three business days of their applications and provide a breakdown of costs, terms, and conditions. And just like the GFE, the document allows borrowers to compare costs between lenders.
Special Considerations
Borrowers applying for a home equity line of credit (HELOC), a manufactured housing loan that is not secured by real estate, or a loan through certain types of homebuyer assistance programs are not provided with GFEs or loan estimates. Instead, they receive truth-in-lending disclosures.
FAQs
A good faith estimate isn't a bill
Because the good faith estimate is based on information known at the time your provider or facility creates the estimate, it won't include any unknown or unexpected costs that may be added during your treatment.
What is a good faith best estimate? ›
A good faith estimate should include expected charges for the scheduled health care items and services, including facilities fees, hospital fees, and room and board provided by the provider or facility. Good faith estimates only list expected charges for a single provider or facility.
Does GFE stand for good faith estimate? ›
A good faith estimate or GFE offers transparency from a lender about the estimated costs associated with a particular home loan. This document has been replaced by a loan estimate for most mortgages, but it is still used in the case of reverse mortgages.
What does a good faith estimate summarize? ›
Good Faith Estimate (GFE) 1 This GFE gives you an estimate of your settlement charges and loan terms if you are approved for this loan.
How is good faith determined? ›
The Duty of Good Faith and Fair Dealing
There is no specific definition, however, of this duty and courts have discretion to determine its scope. When deciding whether the duty of good faith and fair dealing was breached, courts analyze the facts and determine what is fair under the circ*mstances.
What is your right to a good faith estimate? ›
Under the law, health care providers need to give patients who don't have insurance or who are not using insurance an estimate of the bill for medical items and services. You have the right to receive a Good Faith Estimate for the total expected cost of any non-emergency items or services.
What is a good faith estimate standard notice? ›
Under Section 2799B-6 of the Public Health Service Act, health care providers and health care facilities are required to inform individuals who are not enrolled in a plan or coverage or a Federal health care program, or not seeking to file a claim with their plan or coverage both orally and in writing of their ability, ...
What is a good faith estimate contract? ›
The Good Faith Estimate is not a contract and does not require you (uninsured or self pay) individual to obtain the items and services from any of the providers or facilities identified on the Good Faith Estimate.
What is a good faith estimate called now? ›
The good faith estimate used to be the definitive guide to what your expenses were estimated to be but has been replaced by the Loan Estimate. The Loan Estimate and the Closing Disclosure together have made it even easier to understand your loan details and your financial responsibilities when you take out a loan.
Is a Good Faith Estimate a pre-approval? ›
At the end of the pre-approval process, if the bank looks you over and likes what it sees, you'll receive what's called a good faith estimate (GFE), which is a brief document spelling out the likely terms of the loan, including the interest rate, loan type (fixed-rate, adjustable and so on) and closing costs.
A Good Faith Estimate is a data-backed prediction of how many hours an employee is expected to work per week. Employers may base Good Faith Estimates off of similar employee schedules, service demand, data forecasting modules provided by a tech solution, or other data sources.
What is the 7 day rule in a mortgage? ›
Mortgage Closing Waiting Period
The Rule prohibits the lender and consumer from closing or settling on the mortgage loan transaction until 7 business days after the delivery or mailing of the TILA disclosures, including the Good Faith Estimate and disclosure of the final APR.
What is an example of a good faith statement? ›
Each of the Parties hereto undertakes with the others to do all things reasonably within its power that are necessary or desirable to give effect to the spirit and intent of this Agreement. Good Faith. The parties will act in good faith in connection with this Agreement.
How do you write a Good Faith Estimate? ›
The good faith estimate must include a number of disclaimers. For example, it must state that the estimate is based on information known at the time it was created. Therefore, it won't include any costs for unanticipated items or services that are not reasonably expected and that could occur due to unforeseen events.
What is a Good Faith Estimate disclaimer? ›
The estimate is based on information known at the time the estimate was created. The Good Faith Estimate does not include any unknown or unexpected costs that may arise during treatment. You could be charged more if complications or special circ*mstances occur.
What is the difference between a loan estimate and a good faith estimate? ›
The good faith estimate used to be the definitive guide to what your expenses were estimated to be but has been replaced by the Loan Estimate. The Loan Estimate and the Closing Disclosure together have made it even easier to understand your loan details and your financial responsibilities when you take out a loan.
How do you share good faith estimate in simple practice? ›
To share the GFE with a client > click on it from the client's Overview page > click on the downward arrow to the top right to Download. Navigate back to the client's Overview page > click Upload to the top right > upload the downloaded GFE from your computer.
What is a good faith estimate from a bank? ›
A Good Faith Estimate, also called a GFE, is a form that a lender must give you when you apply for a reverse mortgage. The GFE lists basic information about the terms of the mortgage loan offer. The GFE includes the estimated costs for the mortgage loan.
