Good Faith Estimates: What You Should Know

When individuals apply for a mortgage for homes in The Hills, Bedminster, NJ, they are given what is known as a “good faith estimate.” A good faith estimate is a general summery of all of the costs and expenses that you will need to pay at the time that you close on a house. The estimate is supposed to give you an idea of how much you will be spending on the house in total, so that you can be financially prepared. Keep in mind that good faith estimates tend to vary and they are never 100 percent accurate.

However, most professional mortgage lenders try to give you the best estimate that they can, so that you won’t be hit with any unseen fees or additional costs. There are also a few different factors than can influence the final cost and alter the overall estimate. One of those factors is the lawyer that you hire to do the closing. The lawyer may charge more or less than is anticipated. Another factor is the negotiation of the terms of the transaction. If you are able to negotiate the closing costs to be covered by the seller, then you won’t have to pay as much as the estimate indicated. It’s important to research lenders before you sign any mortgage contracts. You want to make sure that you are going with a reliable and reputable lender who won’t try to take advantage of you. A good faith estimate is a good way to see if the lender is upstanding or not. Pour over the estimate to make sure that it is reasonable and legitimate before you sign a contract. You may even want to have your lawyer take a look at it as well, just in case there are any terms that you do not understand.

If the good faith estimate that was calculated for you at the time you applied for the mortgage is going to be substantially different than what you end up actually paying, the lender will notify you in writing. They are legally required to do so. If the final payments exceed 20 percent of the estimate, contact your lender immediately. You may want to go over the mortgage contract with your lawyer to see if there are any mistakes. Ask your lawyer to explain any fees or stipulations that you do not understand. Remember that the contract is legally binding, so you will have to pay the final amount that you owe no matter what. That is why it’s important to go over the good faith estimate with your lender to make sure that the amount will be accurate or close to the actual amount you will have to pay. Even though the law requires good faith estimates, it doesn’t mean that they are always in “good faith.” Take the estimate with a grain of salt, and be fully prepared to pay more than the estimate at the time of closing just in case.