FHA Loans and FHA Mortgages

The Good Faith Estimate is an over abused term and can be misleading. If you speak to a loan officer that quotes you a mortgage rate, they should be able to give you a good faith estimate in less than 24 hours. If they dont, this is a major red flag. If the loan officer qualifies you for a mortgage, no matter if its a FHA loan or a conventional loan, you should receive one in less than 4 hours. There is no excuse or ryhme of reason. Sure, things happen, but just being busy is not good enough. Unless they specifically tell you that they will give it to you the next day because they are busy. This can happen, but other than that, if they dont communicate this with you, no excuse. And this could be indicative to how your loan process will go.

So, what is a good faith estimate? Its an estimate of all your costs associated with buying or refinancing your home. But here is the catch. There are some costs that are known costs and not just estimates. These would be the lenders fees. These are all fees that are under lines 801 to 820.

I just had a client recently compare my good faith estimatewith that of another lender. My title charges were about $500 more in costs. But I knew my estimate was alot closer because all title companies basically charge the same amount. The lesson to learn here? Dont always shop the total fees at the end of the good faith estimate. Please read below.

Three things that you want to look for when you first look at your GFE.

  ˜  Look at the loan program and make sure this is the program that you want. If it was an adjustable, it would say differently.  (Yellow highlight ˜  Upper right hand corner)

  ˜  Look at the mortgage rate. Make sure this is what you discussed when speaking to your loan officer. (Up top, middle of page, yellow highlight)

  ˜  The 3rd issue are the fees. As I mentioned above, everything in section 801 to 815 would be the lenders fees or anything the lender is going to charge you. (left hand column with 10 to 15 highlighted items) Dont ever be fooled if one lenders fee is higher than the other. You still need to compare the mortgage rate.

(Speak to your tax accountant to make sure what can be written off and what cant. But typically just the points can be written off)

What not to do when comparing good faith estimates.

  ˜  Dont compare total fees at bottom of the GFE, which I will explain why below.

  ˜  Just dont compare the APR of the loan. (explain below in a link)

Conclusion:  Again, dont always shop and ask for total fees. Compare the lenders fees the most. In regards to your escrows, each state is different. Your property taxes are paid either quarterly, twice a year, or once a year. I have seen some loan officers sometimes not show enough for your escrows in regards to the property taxes.  Its very easy for a loan officer to say at closing, ˜these arent my fees, so all I can do is give an estimate.  Word of advice, yes, its an estimate. But if they have been doing this for sometime, they should have a good idea of these other fees. Also, if they dont know, they should be asking the title company or someone else. Lastly, just be careful, because some of these figures are not worth the paper that they are written on. Its just that, an estimate based on good faith. Make sure that you always speak with a Mortgage Professional.  And dont shop yourself right out of the market.

Lastly, if you have 3 good faith estimates in front of you, always go back to the person that you had the best feeling with, that you are comfortable the most with, and share the other 2 with them. Just dont run to the person with the best rate and or fees. I always like my clients to come back to me no matter what. I might be able to point something out to them. And this topic must be discussed when receiving a GFE, otherwise this GFE doesnt mean squat.  Locking or floating my mortgage rate !!!!