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Good Faith Estimate (GFE)


A Good Faith Estimate (GFE) is a statement provided by a mortgage lender to a prospective borrower. It details an estimate of all the costs that are likely to be incurred during the mortgage loan process. This includes fees for various services like credit checks, appraisals, title insurance, and so on.


Good Faith Estimate phonetics: Good – /ɡʊd/Faith – /feɪθ/Estimate – /ˈɛstɪmeɪt/GFE – /ˌdʒiː ˌef ˈiː/

Key Takeaways

<ol><li>Good Faith Estimate (GFE) is a document provided by loan originators or lenders to potential loan borrowers. This outlines an estimate of costs, terms, and charges associated with a particular loan agreement. It offers potential borrowers a clear understanding of the costs linked with their mortgage loan.</li><li>Goods Faith Estimate (GFE) has been replaced by the Loan Estimate form post-October 2015 after changes by the Consumer Financial Protection Bureau. Nevertheless, many lenders may still use the term GFE colloquially to refer to the current Loan Estimate form.</li><li>Accuracy is crucial. Lenders are required to provide a GFE to applicants within three business days of receiving a loan application. Mistakes or discrepancies in a lender’s GFE compared to the actual charges can potentially lead to legal troubles for the lender as they’re bound by law to honor the estimate they provide.</li></ol>


A Good Faith Estimate (GFE) is an essential concept in business/finance because it provides consumers with a comprehensive view of the financial obligations they might incur in a particular loan transaction. It helps consumers to understand the costs associated with a mortgage loan by providing an accurate estimate of the total costs, including loan amount, interest rate, loan term, and closing costs. GFE offers transparency, enabling consumers to make informed decisions, compare costs among different lenders, and protect themselves from potential financial exploitation. Therefore, the GFE plays a crucial role in facilitating ethical and cost-effective lending practices in the finance industry.


A Good Faith Estimate (GFE) serves an essential purpose in the finance and real estate realm, primarily used to provide clear transparency between a mortgage lender and a borrower. The primary objective of a GFE is to furnish borrowers with a comprehensive estimate of the costs associated with a mortgage loan. These include, but are not limited to, the loan amount, interest rate, monthly payments, and other related closing costs. Implemented by the Real Estate Settlement Procedures Act (RESPA), GFE assures that borrowers are fully aware of their financial commitments before finalizing the loan agreement.The GFE plays an instrumental role in fostering informed decision-making. It allows prospective borrowers to compare and contrast different mortgage loan offerings to secure the most suitable and favorable deal. Additionally, it helps prevent any costly surprises at the loan closing stage, given that lenders are obliged to provide these estimates within three business days after loan application. Overall, a Good Faith Estimate safeguards the borrower’s interests, promoting an atmosphere of transparency and full disclosure in mortgage transactions.


1. Home Mortgage Loan: When you apply for a mortgage to buy a home, the lender is required to provide you with a Good Faith Estimate. This document includes an itemized list of all fees and costs associated with the loan, including closing costs, inspections fees, and any points or loan origination fees that may be charged. This gives you an understanding of all the costs involved and enables you to compare it with other lenders.2. Refinancing Existing Mortgage: If you’re planning on refinancing your existing home loan, the lending institution should provide you with a Good Faith Estimate. This document would consist of what your new loan terms would be, the cost of refinancing, and the total cost you would incur over the life span of the new loan.3. Real Estate Transaction: The concept of Good Faith Estimate also applies to real estate transactions. Suppose you’re selling a property, and you hire a real estate broker or attorney. They should provide a Good Faith Estimate of their service fees, including commission rates, advertising costs, and any additional charges associated with the sale. This enables sellers to understand all their costs upfront and select the most cost-effective and advantageous service.

Frequently Asked Questions(FAQ)

What is a Good Faith Estimate (GFE)?

A Good Faith Estimate (GFE) refers to a document provided by a mortgage lender or broker in the United States to a customer, which estimates the costs that the customer will bear in relation to a mortgage loan.

When can I expect to receive a Good Faith Estimate?

A lender is required to provide you with a GFE within three business days of receiving your loan application.

What information is provided in a Good Faith Estimate?

A GFE comprises of the estimated costs associated with the mortgage loan including but not limited to the interest rate, monthly mortgage payment, itemized closing costs, and any escrow costs.

Is a Good Faith Estimate binding?

A GFE is not a binding agreement. Rather, it’s an estimate of the costs related to the loan. The final costs may be different, but any significant discrepancy should be explained by the lender.

Why is a Good Faith Estimate important?

A GFE allows borrowers to compare different loan offers and understand the real cost of the loan, making it an important tool in the home buying process.

Is a Good Faith Estimate applicable to all loans?

No, the GFE only applies to mortgage loans. Other types of financing, like car loans or personal loans, have different disclosure requirements.

Has the Good Faith Estimate been replaced or updated?

Yes. As of October 2015, the GFE was replaced by the Loan Estimate form through the implementation of the Truth in Lending Act (TILA) and the Real Estate Settlement and Procedures Act (RESPA).

How can I use a Good Faith Estimate in my decision-making process?

You can use the GFE to compare different loan offers. By comparing the estimated costs and terms of different loans, you can make an informed decision about the best loan to suit your needs.

Can the lender change the terms and costs stated on the Good Faith Estimate?

Some costs can change between receiving the GFE and closing the loan, like those dependent on third-party services. Some changes are legal, but others are not. It is crucial to ask your lender about any significant alterations.

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