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Good Faith Estimates
Good faith estimates are required by law in situations where a lender grants a loan or new home loan to a borrower. Good faith estimates (GFEs) are required before closing. The lender has to grant these estimates to the borrower so that the borrower understands exactly what the loan will cost. For example, good faith estimates will detail the administrative costs, legal costs, and other costs associated with getting a loan. While many borrowers ignore good faith estimates entirely, smart borrowers know that looking over good faith estimates carefully when getting a new home loan, home equity loan, or second mortgage loan, is a must. Looking over your good faith estimates lets you know exactly what you are paying. In some cases, good faith estimates can reveal additional charges, hidden costs, and inflated charges that you can negotiate. Simply by negotiating some of the unnecessary charges on good faith estimates, savvy borrowers can save hundreds or even thousands of dollars. You may be able to get good faith estimates before you even agree to work with a lender. While some lenders will not offer this, many lenders realize that they may get your business by showing you the total cost of your loan. Comparing good faith estimates of different lenders before you choose a financial institution or lender to do business with can tell you exactly who will be the most affordable long-term. Good faith estimates should have all the closing costs, title insurance, legal costs, and other costs that are legitimately important for getting a loan. Make sure that any good faith estimates you get from your lender are accurate. If you have any questions, or if any of the costs on the good faith estimates are not recognizable, be sure to ask. Lenders should be able to explain all the costs on good faith estimates. Also, keep in mind that these costs are negotiable. If a lender, for example, has charged you $150 for wire transfers when you know that a wire transfer in your area costs $40, you are well within your rights to ask why the cost is so high and even to ask for a lower price on that particular item. Being smart with good-faith estimates can get you the best deal on a new home loan or on refinancing.