The Importance of a Good Faith Estimate

The Good Faith Estimate (GFE) is among the most important documents in your life in my view. When you apply for a mortgage, you have to, by law, be given one, and it is aptly named- it is an estimate of the costs associated with your mortgage, itemized and estimated, deemed in good faith to be accurate. These costs include closing costs, bank fees, escrows, and every penny you’ll need at closing.

If, for some reason, there is a significant change in your costs as your mortgage process goes forward, you should be given a revised GFE. There should be no surprises at the closing table, and you should never be subject to a last minute scramble in the days prior to closing because the initial estimate was too low.

The bait and switch occurs when costs change so late into the process that the borrower is forced into choosing between possibly losing a deal or being coerced (extorted) into paying higher fees because they can’t switch lenders.

Just yesterday, a scheduled closing on a buyer client of mine was adjourned because the lender told the buyer that his costs would be $17,000 higher than initially represented at his application. I’m not accusing anyone of a bait and switch, as the reasons given included a far higher tax bill than anticipated and higher title fees. But $17,000 is an absurdly high amount of money to fail to account, and someone dropping the ball big time. If it isn’t clear already, the client found this lender on his own and we had no reason to be concerned thus far.

My advice to the client was to get out his GFE and see where they went wrong. I want to see it. New York is a high cost market with expensive fees for sure, but you don’t overlook 17k and then find it the day of closing without serious fraud or incompetence.

The answer, my friend, may not be blowing in the wind, but it sure is in the Good Faith Estimate.