It doesn’t matter if you’re a seasoned buyer, a first time buyer, or a seller. Every person who has ever been involved in a real estate transaction has one thing on their mind when it comes to attending a closing. How much am I going to have to bring to the table?
Lower closing costs for buyers could mean they can afford a larger home while still maintaining their budget. It would also mean lowering their mortgage payments or just bringing less money to the closing. In some cases, sellers may actually agree to pay some or all of the buyer’s closing costs, depending on the contract negotiations go when the home purchase agreement is made.
Closing costs can be just as much as a down payment for the home, and no one appreciates getting a bigger bill than they anticipated right before the papers need to be signed. Many people question the fees and the amounts associated with closing costs, and some may feel slighted when they receive their final Closing Disclosure Form.
That’s where a Good Faith Estimate used to come in. A Good Faith Estimate was a document that estimated how much someone needed to bring to the closing of a property.
After several years, the Good Faith Estimate was complete with itemized payments, calculated to include any fees or charges that will be due upon closing. A good faith estimate allows borrowers to shop around and compare costs of loans with several lenders before settling on the best choice for them. Smart buyers will look at several lenders to compare costs and any unique situations that they are in.
The Good Faith Estimate will not only include what both the borrower and seller owe at the closing itself, but it will also outline all of the costs of the mortgage loan, such as the loan amount, term, interest rate, penalties, and any other pertinent information.
It should be noted that the Good Faith Estimate was replaced in 2015 with two documents, known as the Loan Estimate and the Closing Disclosure Form. However, if applying for a reverse mortgage, the Good Faith Estimate will be utilized.
Now the question is, “What is a Loan Estimate, or a Closing Disclosure Form?” A Loan Estimate is a form you receive after applying for a mortgage. It gives you important information and details about your loan. As well as showing your payment calculations and estimates. It shows you how much you’re borrowing, how much your monthly payment will be, how much you should bring to the closing, and much more. A Closing Disclosure is a form filled with exact numbers. Whereas a Loan Estimate is simply an estimate or a guess. These tool are necessary and required when looking to obtain a mortgage.