Comparing Good Faith Estimates (GFE's)

I always encourage my buyer clients to talk with at least two lenders.  Different lenders offer different loan programs, closing costs, incentives, and more.  Often, however, this leads to comparing what can be two very confusing documents --- the good faith estimates from each lender.

The Good Faith Estimate is a document intended to outline all of your purchasing costs, and thus is a good document to use when deciding between your two favorite lenders.  But it can often be quite difficult to make the comparison because costs can have so many different names on the GFE, and because there are non-lender fees included in these estimates.

If you are deciding which lender to use based on closing costs, remember to subtract out all of these costs before you make the comparison:

• appraisal fee
• title search/exam
• title insurance
  
• attorney fees
• recordation fees
• city/state transfer taxes
• survey
• homeowners insurance premiums
• insurance and tax escrows
  

All of these costs are independent of your lender or loan program.  For example, you will pay a title company or attorney to handle the closing, but the cost of such will not be determined by your lender.  If one lender estimated that fee on your GFE as $400, and the second lender estimated the fee to be $250, you would assume the second lender was offering you a superior loan program, when in fact you would ultimately pay the same cost for your title company regardless of which lender you choose.

I hope I haven't complicated things further --- just remember that you should not just look at the bottom line of the Good Faith Estimate when you are comparing lenders.