Financing in Oakland>Question Details

Brandon B, Home Owner in Oakland, CA

Right time to get a Good Faith Estimate?

Asked by Brandon B, Oakland, CA Wed Sep 12, 2012

I'm in the market, and pre-approved. At what point should I get the good faith estimate from my potential lender? It seems confusing, as the load details are based on my offer for a home. So, if I get preapproved for 500 k, and get a GFE for a 500k loan, but then bid on a home for 450k, does the GFE for 500k still apply, or does the lender need to provide one for 450k?

If not, should I just wait to get the GFE based on my offer? Seems pretty late in the game. What's the right timing/strategy for evaluating loan providers and costs? If I'm considering multiple loan types, should I get a GFE for each version of the loan?

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Lenders are required to issue a Good Faith Estimate (GFE) within 3 days of when the have the borrower’s name, monthly Income, Social Security number (to obtain a credit report,) property address, estimate value of the property, loan amount, and anything else the lender deems necessary per their written policy. Most compliance departments will not allow their loan officers to issue GFEs unless they have all of these documents - and then they usually need to be checked over to make sure they are correct.

The reason for this is an actual GFE is not what the name implies; it is a commitment, and the lender will be required to pay for any inaccurate estimates - even if the estimated fees are NOT within their control. This includes fees that the SELLER will be paying. I spoke to a fellow lender the other day, and he neglected to put the City Transfer Tax a GFE that the seller was paying, and he had to pay it. This makes lenders very reluctant to issue GFEs until they have to. In your case, unless the offer is accepted thus meeting the "property address" requirement, you probably won't get one.

What you should get is what we used to call a GFE before the government changes the rules. These documents are call everything BUT a GFE, but almost always do a much better job of explaining what you can expect to pay, to whom it will be paid, and what the total payment will be. (The government required documents doesn't actually tell you any of these things in a manner that most people can understand; that's why it's being changed.) You should be able to get this "non-GFE" form at any point in the process, and get updated ones each you change something like price, who will be paying what, rates, etc.

However the most important thing you need to get is your loan officer to go over all the documents and explain everything in detail. This takes me a minimum of 10 minutes, to as much as 30 minutes for some borrowers just for the "non-GFE" alone. A typical real estate transaction is comprised of about 20 different transactions occurring simultaneously, so don't expect it to be easy to understand. Ask questions and make sure you understand everything. Once you get an accepted offer you should get an updated "non-GFE," and you will get the official GFE within the required 3 days along with a bunch of other forms. Again, feel free to go overt these with your loan officer and make sure they all make sense. Don't be afraid to ask questions; you should have plenty.
Web Reference: http://SacRELender.com
2 votes Thank Flag Link Wed Sep 12, 2012
Q: At what point should I get the good faith estimate from my potential lender?
A: As stated below, a lender can only give you a concrete GFI once you’ve identified a specific property.

Q: It seems confusing, as the load details are based on my offer for a home.
A: Correct.

Q: So, if I get preapproved for 500 k, and get a GFE for a 500k loan, but then bid on a home for 450k, does the GFE for 500k still apply, or does the lender need to provide one for 450k?
A: As long as you are using the same type of loan, it’s the same type of property (as an example, with no HOA fees, which vary from development to development) and is in the same city (city transfer tax rates vary from city to city), then … yes. You can expect your closing costs to be marginally lower for a lower loan amount.

Q: If not, should I just wait to get the GFE based on my offer? Seems pretty late in the game. What's the right timing/strategy for evaluating loan providers and costs? If I'm considering multiple loan types, should I get a GFE for each version of the loan?
A: A suggestion: get a Good Faith Estimate from your Realtor – we are not bound by the same regulations as lenders and, quite frankly, can usually produce a list of estimated closing costs that is far closer to reality than many I’ve seen from lenders. As an example, many lenders don’t know the correct costs for inspections, HOA fees for a specific address, even accurate title and escrow fees. A quick phone call to the lender gives me a synopsis of fees that I need for any specific loan or lender.

We provide Estimated Closing Costs for buyers all the time and are usually extremely close – we deliberately use conservative numbers so that the amount at closing is always a tiny bit less than we’ve projected. Additionally, we only show fees that you will be expected to pay as a buyer – the new government-mandated GFEs lenders provide can be extremely confusing because they also show fees paid by the seller.
1 vote Thank Flag Link Thu Sep 13, 2012
I would personally not recommend getting a Good Faith Estimate or applying for a loan through your Realtor. It is good practice to keep the Realtor and Lender separate to reduce the chance of conflicts of interest (also keep in mind your Realtor is typically paid by the seller at closing, and therefore has financial incentive to sell you the home). Your Realtor can still look over your GFE and give you feedback about HOA, title, or other fees that the bank estimated. I would recommend getting GFE's from 3-4 lenders so you can compare apples-to-apples. Lenders can provide you with a GFE without a formal application. It is called a Good Faith Estimate because it is given to you in good faith. You would need to give them your average credit score, purchase price, loan amount, property taxes, and HOA fees, and they will come up with the GFE for you. There is no need to give them your SSN or other information until you decide which lender you actually want to use.
Flag Tue Aug 20, 2013
A lender can give you the closing costs, but a GFE is not 'binding' until a property address is secured.
A GFE (with a property address) can NOT change unless you are given a minimum of 3 days to agree to that change.
What the RE agents are referring to is an Estimate of Closing Costs or a Fees Worksheet.
0 votes Thank Flag Link Wed Sep 12, 2012
Hello Brandon,

Congratulations on your pre-approval for home financing.

To answer your question, it is a very good idea to request a GFE from your Lending institution right away. Your GFE will be subject to change depending on the loan amount you will be requesting. Your lender should provide you with an initial GFE to give you an idea of the closing costs for the price you are being pre-approved for. If the home you decide to make an offer on is less than the initial pre-approval price, then your GFE should reflect a much lesser amount.

And if you are considering multiple loan types, yes, you should definitely request multiple GFEs. For example, all loans above 80% must have Mortgage Insurance (MI), therefore, it makes a significant difference in your closing costs if you are being financed for more than 80%. All loand above 80% require MI fees upfront.

I hope that was helpful. For more information on buyers tips, you may visit http://www.homepeeking.com

You may also find me on http://www.linkedin.com/pub/gia-revelli/5/70/491

Sincerely,

Gia Revelli
0 votes Thank Flag Link Wed Sep 12, 2012
You only need to provide your preapproval letter with your offer. And strategically, even if you are preapproved for $500K, but your offer is for $450K, your lender should give you a new preapproval letter for EXACTLY what your offer shows.

If you provide a letter showing you're approved up to $500K but your offer is for $450K, that merely shows the seller and his strategy-thinking agent that you can afford to offer more. Better keep your cards close to the vest.

If your offer is accepted for 450K then your lender will give you a new GFE.

Your realtor should be able to guide you along regarding how to make a good, clean, strategic offer.

Good luck :)
0 votes Thank Flag Link Wed Sep 12, 2012
Hi Brandon,

In my experience...It is better you get an updated GFE as soon as details are available. This creates a change of circumstance and allows the lender to update/change fees. Even though fees shouldn't change much, you want to be aware of these fees ahead of time in order to shop if necessary.

As far as shopping a potential lender, most lenders should have similar rates. I would shop a Mortgage Bank and a National Lender. You will get a good range of rates. Fees will be somewhat similar. Once you find a Mortgage Consultant that is professional and competent enough to win your business....Stick with him. He/She will guide you to locking through these highly fluctuating times.

If I can be of any assistance....I would love the opportunity to quote you a rate.

Best,

Ivan Diaz
Home Mortgage Consultant
idiaz@lhfinancial.com
(415) 271-7740 direct/cell
0 votes Thank Flag Link Wed Sep 12, 2012
You can get a GFE for each scenario you mentioned. Anytime you feel like you really need or want one is a good time to get one.
0 votes Thank Flag Link Wed Sep 12, 2012
BTW: once in contract, the lender needs to obtain the exact figures from the title company.
So, five minutes may be a little agressive! LOL
Once the figures are given to you on the GFE, they cannot change, so we like the title company to commit to their numbers, as well.
0 votes Thank Flag Link Wed Sep 12, 2012
The law requires that when you have a property addresses, credit has been run and application has been taken (amoungst other requirements), then the GFE is issued.

The lender will need to provide an additoinal GFE based upon the actual purchase price. Once issued it cannot change without your being issued a Change of Circumstance letter and a new GFE.
0 votes Thank Flag Link Wed Sep 12, 2012
It probably takes about 5 minutes to have them change & run a new GFE.
They are required by Federal Law to give you a GFE, so don't be put-off.
You should get at least two Loan estimates and GFE's so that you can compare the numbers.
There are so many numbers....
Why isn't your Buyer's Agent advising you on this?

Good luck and may God bless
0 votes Thank Flag Link Wed Sep 12, 2012
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