Good Faith Estimate Defined

A good faith estimate is a disclosure document that outlines all the fees and charges associated with a mortgage. Along with the fees and charges, it has your loan amount, interest rate, term, and proposed mortgage payment amount. It also has any escrows that have to be paid at closing for taxes and insurance and the amount used to fund your escrow account for future escrow payments.

Not disclosing yield spread premium is a violation of the Real Estate Settlement and Procedures Act, so it’s a crime for sure. If the crime is considered “fraud” per se, I am not sure.

A Good Faith Estimate is a legally required mortgage document showing costs, rate, and payment. Believing the Good Faith Estimate reflects truthful, accurate, and guaranteed figures is folly.

Nothing could be further from the truth.

The Good Faith Estimate is manipulated by the loan officer low balling the costs and rate morphing it from a mortgage disclosure into a selling tool. It does not reflect real mortgage rates or actual closing costs.

What is APR?, is commonly asked question and a confusing concept for the average consumer since most erroneously believe they can use APR to compare mortgage offers.

The confusion is compounded when it is widely reported the government passed The Truth In Lending Act in 1974 which mandated a disclosure of APR on all financing for the express purpose of making financing offers comparable.