If you’re shopping for a mortgage, you want to ask the potential lenders for a cost estimate or estimate worksheet. (It doesn’t matter what the exact title is at the top of the page.) This written estimate provides you with the figures you need to choose a good lender:
* Loan amount, interest rate, and monthly payment.
* Lender fees, including origination fee and discount fee, as applicable.
* Estimated third party costs, such as appraisal, credit report, tax service, and flood cert.
* Title and escrow settlement costs. (Your designated title company and escrow/attorney will determine these exact fees for their services.)
* Recording fee, charged by your local county recorder’s office.
In addition, the loan officer may include an estimate for property taxes, home owner’s (hazard) insurance, and estimated days from the closing to the end of the month (called prepaid interest).
This upfront cost estimate is more useful than the convoluted, new 3-page GFE created by the Feds who have never worked a day in the mortgage business. So don’t feel disappointed or put off.
The actual GFE will be given to you by the lender you have chosen after you provide the necessary documentation for your actual pre-approval. Per law, the lender must give you a GFE, TIL, and other disclosures within three business days of taking your full loan application, including your social security number for the credit check and financial documents.
Currently, a committee is designing a new GFE/TIL form, hopefully, to be completed in 2013. I’ll keep you posted as information becomes available. Please feel free to subscribe to this blog or check back periodically, as desired. As always, thank you for reading my posts.
Acronyms can be confusing. I read your blog and then scanned it again to see if you identified what GFE stood for. It’s probably there but I missed it.
You’re right. Thank you for the reminder. I’ve corrected that oversight now.
Does the cost estimate or estimate worksheet carry as much weight as the GFE? Can you ask for a guarantee on a cost estimate or estimate worksheet?
That’s a great question, Dan.
The cost estimate worksheet replaces the old upfront GFE, and it has as much validity as the old GFE. You can ask for a guarantee that the lender fee will not change and that third party fees will not vary by more than 10%. That specific guarantee does not come with the cost estimate worksheet; it comes only with the formal, 3-page GFE that you receive after making full application, including having your credit report run.
Personally, I prefer receiving a cost estimate worksheet up front for cost comparison, because it has more complete information than the federally-designed, 3-page GFE.
In fact, the 3-page GFE has proven to be so woefully inadequate that a fed. committee is trying to come up with a new, improved one. They’ve scratching their heads over this for more than a year now and still don’t have a form. Sorry, but that’s the government for you. If only they’d let a small team of loan officers design the form, they’d have a superior model in 30 days.
Did you mean ‘non-third party fees will not vary more than 10%’? Otherwise, how could a broker control such costs? Also your book seemed to say that we should ask for the guarantee on fees other than third-party fees.
So, am I right that our two options are a Cost Estimate with no guarantee, but lots of info or a 3-page GFE with a guarantee, but convoluted info? If you prefer the Cost Estimate worksheet, should we not bother with the guarantee anymore? If you have already given all your documentation, should you ask for both?
Thank you for your response, Tariq.
It is the third party fees that cannot vary by more than 10%–when the lender knows the title company and settlement agent you are using. So if the purchase agreement states First American Title and Escrow, the loan officer must contact them to get an accurate quote within 10%. Any additional overage must be paid by the lender as it is their error. However, if you do not state a specific title and settlement agent, then the lender can quote from any company they wish; and in that case, there is NO guarantee that the company you choose will be even close to the estimate.
Yes, you are correct in that your two options are a Cost Estimate with no legal guarantee or the 3-pg GFE with the legally-required, built-in guarantee. I still prefer the cost estimate up front, because it is more detailed and the ethical, honest, decent loan officers will not change the lender fees from that form to the GFE. Any lender who tried to bait-and-switch you like that would lose your business and be open to complaints via social media sites and even the Better Business Bureau. It wouldn’t hurt to ask for a verbal or email guarantee for your own peace of mind.
If you have already submitted all your documentation and are having your credit report pulled, then the lender should provide you with a GFE, Truth-in-Lending, as well as other disclosures within 3 business days. If they are refusing to do so on the basis of not having the property address, then personally, I would not choose to work with such a lender. Most lenders are happy to provide you with the full GFE and disclosures after receiving your financials.