Mortgage is a very important aspect in home buying. Most buyers rely on their mortgage to identify what they can afford.
One thing buyers should know, mortgage package among lenders vary. This also means it is possible that their there will be no two charges alike. You can go on comparing apples to apples about their packages and you will find out that there is really a variance.
With that in mind, it is important that you do your shopping. You can go lender to lender to ask about their rates and their packages. But how do you effectively do a comparison between lenders? How can you make an educated decision before committing to a particular lender?
The answer is on GFE.
GFE is an acronym for Good Faith Estimate. This is a piece of documents containing all the possible charges made by the lenders and the third parties involved in mortgage transactions. Section 800 will give you an outline of the charges connected to your mortgage. On the other hand, section 900-1300 will be about government charges, recording fees, title charges, insurance, advance interest and many others.
It is mandatory that lenders should send by mail the good faith estimate within 72 hours from application. This is part of the government's goal to make educated borrowers and to protect them from any forms of lending abuse.
GFE is important for the borrowers since this will give them more or less the total charges for getting a mortgage. The itemized charges will open the eyes of the borrower that the cost of mortgage is not only about APRs and premiums. Being able to consider other fees will help the borrowers perform a better evaluation.
However, one thing a borrower should keep in mind is that these are all estimates. The final charges will be stated in the HUD-1 form. Therefore, there is a possibility that the charges may be underestimated in the GFE. Remember, there are third party charges. Your lenders or brokers may not make an accurate estimation because only the respective parties can do this. Nevertheless, this is a good basis for understanding the charges that will be made. With all the list of items stated in the GFE, it will pave way for questioning the lenders on what they are for.
Your mortgage broker will be responsible for giving you a detailed GFE. However, the lender's estimate will prevail over the GFE of your broker. This simply means, if you do not want to be taken advantage of, stick with reputable lenders. Do not be contented with lenders that give cheap loans and no fee charges in some of their services. This may just be a front but the charges given up may be offset by the charges made on other services.
Therefore, you have to be careful. You do not want end up paying for cheap fees but may end up costing you more towards the end of the transaction. If things are not clear, get your lenders or mortgage brokers to explain the need for the services included. Do this before making any commitments. After all, it is your ultimate right to know what you will be paying for.
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