What Is a Good Faith Estimate (GFE)?
A Good Faith Estimate (GFE) is a detailed document that breaks down the estimated costs and terms linked to a reverse mortgage loan offer. It’s like a financial pre-nup that helps borrowers flirt with different lenders before settling down with the one that meets their needs best.
Originally, GFEs were a bundle of joy delivered to prospective borrowers under the wing of the Real Estate Settlement Procedures Act for various types of mortgages. However, the romance was short-lived, as by October 2015, the GFE found its one true pairing – reverse mortgages. Those looking for other kinds of home loans get the newer, snazzier ’loan estimate’ instead.
Key Takeaways
- Snapshot of Costs: Expect a financial Polaroid capturing potential fees, costs, and terms.
- Reverse Mortgage Exclusive: Since 2015, GFE is playing hard to get, available only for reverse mortgages.
- Timeliness: Borrowers will receive this financial teaser within three business days of applying.
- Shop Till You Drop: Feel free to collect multiple GFEs before committing to a lender - date around financially!
- Estimates, Not Promises: The prices on the menu aren’t what’s always billed – be prepared for slight surprises.
How Does a Good Faith Estimate Work?
When life gives you a GFE, make informed decisions. It’s your ticket to compare sweet deals from various lenders. Each GFE comes baked with a breakdown of all the savory and not-so-savory costs associated with the reverse mortgage. Like a financial buffet, it lays everything out clearly so you can decide if it’s worth the bellyache or if you should dine elsewhere.
Only those enchanting souls aged 62 and older, seeking to transform home equity into cash through reverse mortgages, will get to unbox a GFE. Once proposed, banks must deliver this estimate faster than a pizza on a Friday night—within three business days.
Limitations of a Good Faith Estimate
Let’s dive into the soup of GFEs – they’re estimates, not set-in-stone agreements. The final check might be a tad heavier or lighter. Think of it as ordering a meal based on the menu description; the actual plate might look a little different when it arrives.
Good Faith Estimates vs. Loan Estimate Forms
Post-2015, traditional mortgages moved on to a new love interest: the Loan Estimate. Both documents share a love for transparency and borrower empowerment, letting you shop and compare without committing. They’re like siblings from different financial epochs – similar DNA, different birth certificates.
Special Considerations
For those looking at a home equity line of credit or sauntering through certain homebuyer assistance pathways, don’t expect a GFE or a Loan Estimate. These paths have their own financial GPS: the Truth-in-Lending disclosures.
Related Terms
- Reverse Mortgage: A type of loan for seniors that converts home equity into cash. No need to repay the loan until you sell the home or the last borrower leaves the mansion.
- Loan Estimate: This document took the baton from the GFE post-2015 for most mortgages, detailing costs and terms in a consumer-friendly format.
- Real Estate Settlement Procedures Act (RESPA): A U.S. federal law designed to protect home purchasers and sellers by mandating disclosures about the real estate settlement process.
Further Reading
To deepen your understanding of mortgage documents and financial responsibilities, consider these books:
- “The Mortgage Encyclopedia” by Jack Guttentag
- “Reverse Mortgages for Dummies” by Sarah Glendon Lyons and John E. Lucas
Dive into the swirling world of GFEs with an expert lens and maybe a pinch of humor, courtesy of your financial cupid, Penny Wise.
