Why You Need a Good Faith Estimate

A good faith estimate is extremely important when shopping lenders for your home loan. A good faith estimate is a piece of paper showing the buyer what can be expected for them to have to pay at closing. It is important to remember that this is only an estimate and does not hold up in closings. You will receive a HUD-1 prior to closing which should be a more accurate estimate of what your closing costs will be. The Real Estate Settlement Procedures Act (RESPA) requires a lender to supply you with a good faith estimate within three days of receiving your loan application. The RESPA has itemized the document into sets of codes to help the buyer understand the fees. This typical form is a projected way for you to shop texas mortgage brokers and compare the sets of codes provided from each lender. As a good judgment, when shopping around for mortgage lenders you should compare at least two different good faith estimates.

Shopping and comparing lenders can become very confusing. Good faith estimates usually look similar at a glance, but if you take a closer look, the lenders may not list the same fees the same way. One lender may charge a fee for something that another lender does not, or the fee may be excessive in comparison. If you see something like this, or if you see a fee that you do not understand, ask questions. You are entitled to understand this document; my advice is to keep asking questions until you get a response that you understand. Buying a home is a major decision in your life, the costs can add up quickly.

The chart below shows the itemized set of codes that the RESPA has created.  For further information on each fee, visit my related article on What you should know about Home Closing Costs at https://lonestarfinancing.com/blog/2007/11/13/what-you-should-know-about-home-closing-costs/. This article is  a breakdown of the individual fees involved in the closing of your home, what fees you should look out for, and which fees you might be able to negotiate.

Good Faith Itemized Codes

  • 800 – ITEMS PAID IN CONNECTION WITH LOAN:
    • 801 – Origination Fee
    • 802 – Discount Fee
    • 803 – Appraisal Fee
    • 804 – Credit Report
    • 805 – Lender’s Inspection Fee
    • 806 – Mortgage Insurance Application Fee
    • 807 – Assumption Fee
    • 808 – Mortgage Broker Fee
    • 810 – Tax Related Service Fee
    • 811 – Application Fee
    • 812 – Commitment Fee
    • 813 – Lender’s Rate Lock-In Fee
    • 814 – Processing Fee
    • 815 – Underwriting Fee
    • 816 – Wire Transfer Fee
  • 900 – ITEMS REQUIRED BY LENDER TO BE PAID IN ADVANCE:
    • 901 – Interest for days
    • 902 – Mortgage Insurance Premium
    • 903 – Hazard Insurance Premium
    • 904 – County Property Taxes
    • 905 – Flood Insurance
  • 1000 – RESERVES DEPOSITED WITH LENDER:
    • 1001 – Hazard Ins.
    • 1002 – Mortgage Ins.
    • 1004 – Tax & Assmt.
    • 1006 – Flood Insurance
  • 1100 – TITLE CHARGES:
    • 1101 – Closing or Escrow Fee
    • 1102 – Abstract or Title Search
    • 1103 – Title Examination
    • 1105 – Document Preparation Fee
    • 1106 – Notary Fee
    • 1107 – Attorney’s Fee
    • 1108 – Title Insurance
  • 1200 – GOVERNMENT RECORDING AND TRANSFER CHARGES:
    • 1201 – Recording Fee
    • 1202 – City/County Tax/Stamps
    • 1203 – State Tax/Stamps
    • 1204 – Intangible Tax
  • 1300 – ADDITIONAL SETTLEMENT CHARGES:
    • 1301 – Survey
    • 1302 – Pest Inspection

For further information on each fee, visit my related article on What you should know about Home Closing Costs. This article is a breakdown of the individual fees involved in the closing of your home.

Rachel McGuire
Austin Mortgage Broker

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