Real Estate --- The good faith estimate You have recently completed the process of buying your brand new home. In the morning you have the exciting task of picking up the keys and experiencing the closing process. However, don’t get too excited yet, you should be prepared by following a checklist before you close.
The first thing you should do is go over the good faith estimate. You will be given one of these to let you know what monies you should have with you at closing. You will want to go over every line to make sure the figures are correct. It is time to redo the math to determine no mistakes were made. This can happen and so can so many other things.
The good faith estimate is presented to you within three days of applying for your loan. There are basically three elements on this document. The loan fees, the interest rate, and the points. It is the fees which you want to take a close look at when examining this document.
There are so many fees the lenders charge it is almost scary. You have the typical loan origination fee. Then you may have a processing fee, a registration fee, a document preparation fee, and many more. You can ask for each and every one of these fees to be explained, reduced, or even waived when it comes time to actually sign the loan paperwork.
The lender will most likely state that this is just company policy and the fees are normal charges. It is these fees which can cause appalling surprises at the closing table. The good faith estimate may state your closing fees will only amount to $1,800 or so. When you get to the table, the fees have jumped to over $2,500. Unfortunately this happens more and more often these days.
The lender will lock in the interest rate and the points cap to ensure you will use their services to obtain the loan. In actuality, it is the lender's fees which should be locked in place. These are day to day fees which may be necessary to pay and yet do not fluctuate a great deal over a short period of time. Yet from the time you apply to the time you close the processing fee went from $150 to $350. When you ask why you are told that is the fee the bank is now charging. The question should be why is there a processing fee when there is a loan origination fee? This is something most buyers will just assume is a natural thing and agree to pay it to save face. It is not necessary to do that.
When you speak with a lender, you can ask to have each fee broken down so you can understand them. Many times when you do this and start asking questions, the loan officer will adjust the rates and keep the fees more simple. This will ensure you get the actual good faith estimate you are supposed to be given. When you are all done negotiating with your lender, do one other thing. Get it all in writing. You do not want any more surprises at the closing table. By making the lender put in writing exactly what they are going to charge you for each service, and making them list each service individually, you can save yourself quite a bit of money at the closing. Money you can spend on the new home you just purchased.
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