Page 2 of the Good Faith Estimate itemizes all of the loan’s closing costs. Here are some things you should keep in mind as you fill it out.
This is the section dealing with the fees that your mortgage lender, mortgage broker, bank or credit union charges. You can usually negotiate here. Maybe you can pay less in the way of fees in exchange for a higher mortgage interest rate, or pay more fees for a lower rate. It depends on the lender and loan program. But the fact that you have that control makes this an important part of the itemization.
Block B Items 3-6:
This deals with the closing costs from third parties such as title and appraisal companies. They’re usually pretty similar from lender to lender, although there may be minor variations.
Block B Items 7-8:
These are government charges for recording fees or transfer taxes. Be wary of any mortgage company that quotes you artificially low government charges, because the company doesn’t have any more control over those charges than you do. Any company that cites you lower charges probably isn’t being honest with you.
Block B Items 9-11:
These are prepaid items, which aren’t to be confused with closing costs. Again, they should be the same from lender-to-lender, and any mortgage company that promises you a lower price on them probably isn’t being straight with you.
For example, some companies underfund the initial deposit you make in your escrow account for taxes and insurance, listed in item 9. You’re better off with a higher initial deposit. If it isn’t fully funded initially, your monthly payment is likely to go up in the future.
Or a company may intentionally underestimate the amount for item 10, which is the prepaid interest on your mortgage and varies according to the day of the month that you close. The more days left in the month, the more you’ll need to pay. A mortgage company isn’t doing you any favors by estimating the interest based on five days or so. A company better serves your interests by conservatively estimating the interest based on 25 or 30 days, helping you to budget.
One final note:
As a result of negotiations, the seller may agree to pay some or all of your points and closing costs. But keep in mind that the GFE forms, which the government created, do not include any place to specify the respective costs paid by you or the seller.
If you have any questions or need any advice on the GFE, or any other aspect of the mortgage process, please feel free to contact us anytime.