{"id":14479,"date":"2021-05-01T15:58:53","date_gmt":"2021-05-01T21:58:53","guid":{"rendered":"https:\/\/www.lexingtonlaw.com\/blog\/?p=14479"},"modified":"2024-05-06T13:24:40","modified_gmt":"2024-05-06T19:24:40","slug":"good-faith-estimate","status":"publish","type":"post","link":"https:\/\/www.lexingtonlaw.com\/blog\/loans\/good-faith-estimate.html","title":{"rendered":"The evolution of the good faith estimate"},"content":{"rendered":"\n
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The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. <\/em>See Lexington Law\u2019s editorial disclosure for more information.<\/em><\/a><\/p>\n\n\n\n

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A good faith estimate (GFE) is a comparison of mortgage offers provided by lenders or brokers to a consumer.<\/h2>\n<\/div>\n\n\n\n

A good faith estimate (GFE) is a comparison of mortgage offers provided by lenders or brokers to a consumer. It was recently replaced by the loan estimate\u2014a similar concept with a few small differences. <\/p>\n\n\n\n

What Is a Good Faith Estimate Designed to Do?<\/strong><\/h2>\n\n\n\n

The GFE\u2019s purpose was to present mortgage shoppers with all the details they need to know about their mortgage options to help them make well-informed decisions. This transparency ensures consumers are aware of all the costs associated with the mortgage\u2014including fees, APR<\/a> and other expenses.<\/p>\n\n\n\n

Borrowers would receive a GFE three business days after submitting their mortgage application, and after thorough review, would then select which mortgage option they would like to move forward with. <\/p>\n\n\n\n

Are Good Faith Estimates Still Used?<\/strong><\/h2>\n\n\n\n

The term \u201cgood faith estimate\u201d is not used by lenders anymore, but the concept remains prevalent. In 2015, the GFE was replaced by the loan estimate.<\/a> Anyone who purchased a home after October 3, 2015, received a loan estimate rather than a GFE. <\/p>\n\n\n\n

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If you applied for a reverse mortgage, HELOC, a mortgage through an assistance program or a manufactured loan not secured by real estate, you will not receive a loan estimate. Instead, you will receive a Truth-in-Lending disclosure. <\/p>\n\n\n\n

The purposes of a GFE, a loan estimate and a Truth-in-Lending disclosure are largely the same: providing transparency to borrowers. The main difference\u2014and benefit\u2014of a loan estimate is that there\u2019s more regulation by the Consumer Financial Protection Bureau (CFPB). Since the GFE was not standardized through regulations, they were sometimes difficult to decipher, especially for first-time homebuyers. Conversely, each loan estimate must contain the exact same information in a standardized way, which we\u2019ll cover below. <\/p>\n\n\n\n

What Appears on a Loan Estimate?<\/strong><\/h2>\n\n\n\n

According to the CFPB, a complete, compliant loan estimate should include the length of the loan term, the purpose of the loan, the product (fixed versus adjustable interest rate, for example), the loan type (conventional, FHA, VA or other), the loan ID number and indication of an interest rate lock. Additionally, the loan estimate will include the following:<\/p>\n\n\n\n