Closing costs (also called settlement fees) on a $200,000 home loan average around $2,539 according to a recent survey by Bankrate.com. Your costs may be more or less depending on a variety of factors, including where you live. It's important to review and understand your closing costs before you commit to the loan. That's where the Good Faith Estimate comes in.
Three business days after submitting your completed mortgage loan application, your lender must provide you with a Good Faith Estimate (GFE) that outlines your loan terms and the fees that will be due at closing. Review the GFE carefully, go over the list of fees with your lender, and ask questions to make sure that you have a clear understanding of what you are paying and why.
On the summary page of the GFE you will find:
It is important to remember that the GFE is only an estimate, and the actual charges may differ. Page 3 of the GFE explains how much certain fees can change between the estimate and actual costs.
At your closing, you will receive a HUD-1 Settlement Statement, a form that lists your actual costs. Compare the charges on the HUD-1 with the charges on your GFE to ensure that they have not dramatically changed. If they have changed, be sure to get a clear explanation of why.
Get more information on understanding your costs.
By the way, the Consumer Financial Protection Bureau has announced a new Loan Estimate Form that lenders will begin using later this year. This improved form combines the information currently found on the Good Faith Estimate and the early Truth in Lending disclosure.
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