Tag Archives: loan estimate

Good Faith Estimate, Loan Estimate, or Cost Estimate?

House prettyPeople are confused about how to get an estimate for their mortgage. If you are getting pre-approved to buy a home or want to refinance, here is what you need to know about getting an upfront estimate.

GOOD FAITH ESTIMATE

This form was officially retired October 3, 2015. The Consumer Finance Protection Bureau (CFPB), the committee set up by the White House to oversee lending law, replaced it with the Loan Estimate. However, you cannot get an LE upfront, so please read below. To be perfectly clear, the GFE is dead and gone. No more GFEs allowed.

LOAN ESTIMATE

This simplified form is what you get only after making a full application. That means you provide the lender with these six items: (1) name, (2)  social security number for pulling credit report, (3) property address, (4) sales price or estimated value of property, (5) loan amount, and (6) income.

As you can see, #2 will stop you if you aren’t ready to commit to a lender and have your credit report pulled. In addition, #3 will stop you if you’re still shopping for a home and don’t have an address. This is why you don’t ask for a loan estimate upfront. It comes later in the process.

COST ESTIMATE WORKSHEET OR FEES WORKSHEET

This is the new “upfront Good Faith Estimate.” This form will show you everything you need to see about your loan: interest rate, monthly payment, lender fees, and other closing costs. If you read Mortgage Rip-Offs and Money Savers or Homebuyers Beware, use the same shopping method in those books, except ask for a Cost Estimate rather than a GFE. It doesn’t matter what title is at the top of the page, so don’t worry if a lender has a variation.

If you have any questions about this, post a comment or send me an email.

I am licensed to do mortgage loans in California and Washington states. Please let me know if I can be of help to you.

NMLS #1284134
Envoy Mortgage, a full service mortgage lender

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How to Shop for a Mortgage Now — with no GFE, Good Faith Estimate, post-TRID

Speak with the loan officer to determine if you have a good personality match.

Since the release of new lending laws, commonly called TRID, on October 3, 2015, there is no more GFE (Good Faith Estimate) or TIL (Truth in Lending). Both of those forms have been replaced by the Loan Estimate (LE). But, you cannot get a LE without first having the address of the property you want to buy. So how do you shop for a home loan at the pre-approval stage?

Here is a quick and easy summary of the three steps I recommend.

1) Call three lenders and ask for an Estimate Worksheet.
This is the new upfront GFE. Depending on the lender, they might call it an Initial Fees Worksheet, Fees Worksheet, or simply use an Excel spreadsheet. Either way, this form shows the interest rate, monthly payment, and fees so you can see the cost of the loan.

2) Speak with the loan officer, compare pricing, and choose your lender.
Notice that I did not say email the loan officer and make your choice. Don’t be lazy! This decision is too important for you to hide behind your screen. Pick up the phone and have a real conversation with the loan officer, because you need to get a sense of whether or not this person is honest, communicates well with you, will provide good service and updates throughout the loan process, and so on. You cannot get all that in an email.

3) Proceed with your pre-approval.
Now is the time to submit your income and asset documentation, photo ID, as well as other paperwork so you can get a good, solid pre-approval letter on company letterhead. You will need this in order to present an offer on a property. Give your pre-approval letter to your real estate agent.

That’s it! Now you are ready to meet with your Realtor and shop for homes.

After you have a mutually signed Purchase & Sale Agreement, ask your agent to send a copy to your loan officer. Now the time clock begins!

With a closing date in place and the PSA in  hand, your loan officer will proceed with processing your loan. He or she will send you Loan Disclosures that include the Loan Estimate as well as other information required by TRID law. You will sign to acknowledge receipt and work with your loan officer through to closing.

If you happen to be buying a home in California or Washington, I would love to be your loan officer and mortgage advocate.  I work for Envoy Mortgage, a full service mortgage lender. (We have our own money to lend as well as work with the wholesale division of other lenders such as Chase, Wells Fargo, Caliber, and others to get you the best deal.) My NMLS # 1284134. Envoy is a Fair Housing and Equal Opportunity Lender.

Can You Trust a Mortgage Cost Estimate?

SkepticThe Cost Estimate Worksheet or Initial Fees Worksheet is the form loan officers provide before they have taken a full application and pulled your credit report. What people are asking me now is, “Can I trust this estimate or will they increase their fees later?”

Great question, and I have an answer for you that will make sense.

The official 3-page Good Faith Estimate is a contractually binding document from the lender to you (per recent lending laws). The lender may not increase their lender fees by even one dollar from that GFE to the final Settlement Statement.

But the problem is, you cannot get that GFE without having your credit report pulled and submitting your financial documents. The new law ties the lender’s hands in that regard, because how can they commit a contract to you without verifying what you qualify for? So the worksheet serves as the upfront estimate now, due to this federal regulation.

This is no problem. The upfront worksheet is more specific than the GFE designed by the feds. I actually prefer it for comparing loans. However, it is not a contract, so can they increase fees later?

Yes, they could; but it would be a very stupid thing to do. And no, the good, honest, ethical loan officers would never do that!

The good, honest, ethical loan officers don’t lie to potential customers. They look out for your best interests and do all they can to help you get the best financing. They would never risk having you ditch them and file a complaint with the Consumer Financial Protection Bureau for committing bait-and-switch. Moreover, their personal moral compass would never allow that.

Even still, I have seen a minority of loan officers increase their fees between the initial worksheet and the GFE. (I see estimates from lenders all around the country from good folks using my coaching service.) There are usually red flags on the worksheet that raise suspicion.

For example, they leave off essential costs such as the appraisal report and property taxes. Then on the GFE when those are added in, they also show an increased origination fee. If that should happen to you, please send me an email and let me know. I will reply explaining what recourse you have.

Fortunately, most of the shady loan sharks are no longer in business. If your loan officer has a Mortgage Loan Officer License with a MLO #, it means he or she has completed the 20 hours of study plus additional hours of state-specific study, has passed an extensive background check including fingerprinting, and a credit check. Look for that number (or ask) and listen to your gut instinct or internal lie detector.

If you still feel uncertain, feel free to send me a question here. Your mortgage is important, and you should feel confident as you proceed with your loan.

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