Good Faith Estimate | Truth in Lending
The Real Estate Settlement Procedures Act (RESPA) requires that banks, mortgage brokers, and mortgage lenders provide borrowers with a Good Faith Estimate and Truth in Lending disclosure as part of the loan process.
These forms, which must be provided within three days of loan application, are essentially a loan summary and an estimate of the charges you’ll incur upon settlement of your loan.
Good Faith Estimate
The Good Faith Estimate, or “GFE” provides basic information such as the lender name and address, sales price, loan amount, interest rate, and type of loan.
Use Them to Shop Your Loan
Once you’ve got your GFE and TIL, you’ll have a better idea as to what the mortgage broker or bank/lender is offering you.
So even if lender “A” offers you a lower interest rate, once related costs are factored in, the actual APR may be cheaper with lender “B” who is offering a higher interest rate because they’re charging you less in the way of fees.
All this said, remember that neither a GFE or a TIL is an interest rate lock, and the actual interest rate is not locked until you make an official lock request and get the confirmation in writing.
It’s important to understand this because rates vary daily, and your estimate is only as good as the day it was written.