It’s finally over: All those hours spent searching for the perfect home, shopping around for mortgages and running different scenarios on a mortgage calculator are finally behind you. You’ve got your loan and found your house – all that’s left is the closing. Sign a few papers, grab the keys and the house is yours. Well, not quite. You’ve still got to pay all those closing costs – typically about 2% to 6% of the cost of the home (that’s anywhere from $4,000 to $12,000 on a $200,000 home). Now, no matter how you slice it, that’s a considerable sum. Fortunately, you’ll have some time to plan on what to expect, thanks to a handy little document called the Good Faith Estimate, or GFE.
The GFE is a form your lender will give you, and it lists all the ESTIMATED costs you’ll be paying at your closing, as well as the terms. Notice how the word “estimated” is all in caps in the previous sentence? That’s because, just like the name says, the GFE is an estimate – a best guess – and that means your closing costs could be slightly higher or slightly lower than what’s listed in the GFE.
Typically, a lender must provide a borrower with a GFE within three days of loan approval. That gives the buyer a decent amount of time to review the list and, sometimes, negotiate some of the costs and fees down – and also to make sure there’s money on hand to handle the costs.
Developed by the U.S. Department of Housing and Urban Development (you’ll probably recognize it by its ultra-cool, Hollywood-esque nickname: HUD), the GFE includes costs divided into six categories:
GFEs often have a few costs included that are not-so-lovingly referred to as “junk fees.” These include things like courier costs and copying fees, and usually these items can be negotiated out or at least down. Identifying those costs early on and asking to have them chucked out is a very good reason to review your GFE as soon as you get it.