New Good Faith Estimate Form

by Jay from Atlanta

Learn about the new Good Faith Estimate form and how to protect your quoted and lock-in mortgage rate: Kate, I'm looking at a mortgage broker to refinance my home using HARP 2.0 who doesn't charge points or origination fees. But I know fees are coming on the back end. What fees should I be concerned about? Are they usually inflated to cover not charging for points or origination fees?


Kate Answers: Learn about the New Good Faith Estimate Form

***zz-portrait-left.shtml*** Hi Jay,

The ultimate mortgage borrower question! I'm so glad you asked about rate quotes and hidden fees!

Effective October 3, 2015, the Good Faith Estimate and Truth in Lending forms have been replaced with the Loan Estimate form. Follow this link for up-to-date help with the New Loan Estimate - Know Before You Owe. However, the information on Changed Circumstance found on this page remains pertinent.

Let's take a look at how to protect your quoted mortgage rate and locked-in rate starting with the new Good Faith Estimate form (GFE) of 2010.

Consider the Legitimacy of the Quoted Rate

It's safe to assume that lenders must profit on your loan to keep their doors open. But how is this possible if you aren't paying discount points or origination fees?

You could be paying a higher than market mortgage rate. In other words, is the lender financing their origination charges by increasing your interest rate?

This is a strategy used by some homeowners who intend to refinance or sell their house in a few years. Regardless, you need to know so YOU can decide if this plan works for you.

Or are you being quoted the unattainable deal that is hard to pass by?

Revised Good Faith Estimate Form and RESPA Rule of 2010

Several safeguards were introduced by the Real Estate Settlement Procedures Act (RESPA) Rule, especially the disclosure of yield spread premiums, a common way fees were hidden from borrowers before 2010.

Even so, there must be loop holes because I still receive letters from homeowners with rate lock problems. You'll find even more of these letters to Ask Kate here.

So I am not convinced that RESPA's revised estimate with its safeguards solved the problem of increased fees and broken rate locks. Not at all!

Is Changed Circumstance the Common Loop Hole

In spite of RESPA's intent to prevent significant changes after GFEs are issued, borrowers are still getting surprised with unpleasant changes in closing costs, fees, and rate locks!

How could this be? Consider the following 4 scenarios that allow lenders to change your closing costs and interest rate:
  1. Emergencies such as war

  2. Initial information was inaccurate

  3. New information crops up

  4. Other unexpected issues such as flood insurance
Well, I don't think it takes too much imagination to see how these provisions (loop holes) spell uncertainty to the borrower. What starts out as an awesome deal has the potential to change.

More on Changed Circumstance and what it means to your quoted rate here.

Manage Changed Circumstance Provision to Retain the Quote

You can't do much to prevent an emergency like war or know whether an environmental issue might slow down your transaction. But inaccurate or missing information is a different story.

Provide accurate and timely information to nip Changed Circumstance in the bud!

Give accurate and complete information to your loan originator. Retain copies of all submitted documents such as pay stubs. Get copies of your loan application and Good Faith Estimate signed by the lender and you.

Now you have verification of the original information you provided.

If you are told new information has arisen that will increase the cost of your mortgage rate or fees, don't roll over and accept it as fact. Question it.

If you aren't satisfied with the explanation, get in touch with a supervisor. Or in the case of using a mortgage broker, you can call the actual lender who is underwriting and funding the loan.

Manage Your Locked-In Mortgage Rate

You should understand the lock policies of the lender you pick before you make loan application. How? By asking your prospective lender or mortgage broker qualifying questions.

Make sure your lock-in period is long enough to close your loan. The longer you lock, the more it costs. But rate lock extension fees cost more!

Don't delay the transaction. If your lock expires, expect any delays on your part to be pointed out. This means you could be socked with extension fees or re-locking at current (and higher) rates.

Monitor, monitor, monitor your transaction. Watch the calendar and keep in touch with your originator. Cooperation on your part is one more way to keep Changed Circumstance from gobbling up the deal you were initially quoted.

Good luck and best wishes,

P.S. Wondering what the difference is between discount points and origination charges? Here is a quick rundown.

Discount points are upfront interest prepaid by the borrower at closing to get a lower-than-market mortgage rate for the term of the loan.

If you are borrowing $100,000, 1 discount point equals $1000. The amount the rate is decrease by paying 1 point will vary day to day with the market.

The origination charge must now include application, processing, underwriting, document preparation, administration, mortgage broker, and other miscellaneous charges per the revised GFE form. ***zzz-link-harp-news.shtml***

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Lock Mortgage Rate Now or Wait to Buy House
by: Beni from New York

Here's my situation, I have found the house that I want. Inspection was done last week. My credit score is over 800.

I'm looking to sign the contract with the lawyer on Monday. I have not applied for loan yet, although I have several pre-approvals. Looking to put down a minimum of 10% or 20% using retirement funds.

My questions:
1. Considering what the Federals have said about bringing the mortgage down, when should I lock in the rate or is it a good idea to wait few months to apply for mortgage?

2. Is it a good idea to use retirement funds to reach 20% down payment?

Thanks. Beni

Hi Beni, Kate here. Think of it this way. When you lock in a mortgage rate, you are gambling that the market is going up. But on the other hand, when you don't lock, you are gambling that interest rates are going down.

But be careful trying to get the lowest mortgage rate because no one knows when the bottom has come until rates begin to climb once more. There are just too many economic and political factors to adequately predict the right time to lock.

See my mortgage rate lock guarantee here. Then follow the links in the right column to helpful information you will want to read BEFORE locking interest rates.

As far as using retirement funds for a down payment, one general consideration is the length of time that will pass before retiring. But for advice tailored to individual retirement plans, always contact a financial planner or your CPA.

Sincerely, Kate

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