Comparing Good Faith Estimates

First lets start by saying “not all Good Faith Estimates are treated equally”.  Just knowing a little bit about the Good Faith Estimate can be beneficial to your success at saving money and comparing apples to apples. 

The definition of a Good Faith Estimate is simple; how much is it going to cost me up-front and long term for this mortgage?  Although the definition is easy the form can be very complex in detail. 

I highly recommend comparing three Good Faith Estimates.  Please do yourself a favor and get 1-2 local mortgage companies, 1-2 national mortgage companies,  and possibly 1-2 local banks / credit unions.  This will show you a wide variety of lending institutions and will provide a pretty good average of what it will cost you for your new mortgage.

What’s going to make your job difficult is the "other people"!  The other people (lending institutions) are in business to make money and sometimes they will take desperate measures (some times not legal) and be very creative on earning your business.  All that you (the borrower) cares about, is you end up with the house you want and get it at a reasonable price. 

Your mortgage loan is very similar to trading in an old car for a new one at the dealership.  The bottom line profit is the bottom line; how everyone gets there can be different.  One dealership might give you more for a trade in, but be higher in the price while the other dealership is exactly the opposite.  The mortgage loan process can work the same way.

Some basic principles are that your loan consists of a mortgage rate, term, and fees that go along with getting the mortgage.  The mortgage fees, rates, and terms may be negotiable.  Keep in that when you try to save money in one are than the other area could be affected like every thousand dollars you save in the costs could ultimately raise your interest rate you negotiate.  The financial institutions have to make money somewhere, but they don’t necessarily have to make money everywhere. 

Lets start with the interest rate and terms.  After you have determined what loan program is right for you (30 year mortgage, 15 year mortgage, ARM, Balloon, etc.) then the rate can be determined.  Once we established what our mortgage program / term and rate are than this is what we use for every good faith estimate we ask for. 

The fees now become where mortgage lender and mortgage brokers become creative.  If you are dealing with honest and reputable mortgage companies than your job becomes very easy.  If the honest companies follow guidelines exactly as they should than comparing fees next to each other is simple and quick, but the question is if they are a little “sly”.   

Looking closely at the 800 section of the good faith estimate, it’s a great starting place to compare.  This section is at the top and is called “Items in connection with loan”.  These fees can and sometimes should be negotiated.  When comparing good faith estimates add up what you see in this section and compare them against others, because this is about the only wiggle or negotiating room you have after the interest rate is determined.   

In general the rest of the good faith estimate are fees are and will be the same no matter what financial institution you use.  There are a few possibly negotiable fees left, but usually not worth it or rarely done.

Just beware and good luck comparing Good Faith Estimates.