Understanding the

Good Faith Estimate

HUD Settlement Costs Booklet
for further details
HUD ARM Booklet
if applicable

Before we discuss the topic at hand (or on web page, as the case may be) please allow me put the subject in context. You've filled out application and requested a tri-merge credit report. You're tired of answering questions. In fact you want to ask some of your own. Do you qualify for a loan and if so, at what interest rate?

We answer all those questions, in writing. To the best of our ability given the information you provide, we'll send you a written estimate. This standard form has the 'creative' name of Good Faith Estimate, or GFE. But be careful when comparison shopping for a loan. Some less ethical mortgage brokers, and the non-standard treatment of terminology by lenders, makes the road from what is on the GFE to the items that ultimately go on the HUD-1 form appear to be a shell-game. Some lenders charge a bunch of separate little fees. Others charge fewer, but larger, fees. How do you make sense of it all?

What I like best are 'No Cost' loans. Despite what you may have been led to believe, there is no such thing as 'No Cost' loan. In fact, for every loan transaction there many professions--governmental and licensed private agencies--involved. Each activity has an associated cost. These costs are estimated on the GFE. The actual charges will be documented on the HUD-1 Form you'll sign at closing.

If we don't have all the information, our estimate is not going to be as accurate as it would be if we had all the facts at the beginning of the loan process. You've heard the expression, "garbage in, garbage out," haven't you? It certainly applies here.

Let's assume for the moment that all the information you provide is correct. Here are most common items found in the GFE. Prepaid items in Section 1000 are not considered to be part of closing costs. They are often included on GFE reports to show you a complete picture of your costs.

Also, be aware of the tax implications of these charges. Many are tax deductible. See the Tax Advantages of Home Ownership for more information.

In summary, the variables from lender-to-lender, missing information from you, the borrower, and the fact that the same items may not appear on everyone's GFE often make it impossible to obtain the true cost of a loan. We here at Lightning Mortgage make every attempt to provide Good Faith Estimates that are as accurate as possible. We try to avoid surprises at the closing table at all costs!

The actual loan amount, interest rate, and term of the loan are clearly spelled out on the top of the document. If you have further questions about your GFE, we'll be glad to review it with you.

The key to remember is that this report is only an estimate. If new information is uncovered or you want to change the terms of the loan then the amounts are subject to change. Compare this document to the HUD-1 Closing Document, which will list the actual amounts charged. Here is our entire Loan Process.

Thank you for registering. The GFE form is described below:

These items are payable in connection with the loan:
Line	Heading	Description
802	Loan Discount	Also known as 'Points.' A charge lenders use to adjust the yield of a loan. Par pricing has no loan discount fee. Most people will choose to borrow at the par rate because they want to keep the upfront costs of a loan low, but paying 'points' will often lower the total cost of the loan. *We at Lightning Mortgage have a great formula for determining when to pay points. Click on Sweet Spot. This is tax deductible (entire amount in first year on purchase, spread over life of the loan on a refinance).
803	Appraisal Fee	A fee charged by an independent licensed appraiser that can range from $200 to $600, depending on where you are in the U.S. and the type of property is involved. Investment properties usually cost more. Local independent appraisers who are familiar with your geographic area are used. They'll contact you directly, to arrange a for the visit. Our policy is for you to pay the appraisal fee at the time of the appointment.
804	Credit Report	This is the fee charged by the credit reporting agency we use to pull a copy of your tri-merged credit report. The second step in our application process is to have you order this report, normally just $15.
808	Mortgage Broker Fee	This is the fee charged for brokering the loan. This is also tax deductible (entire amount in first year on purchase, spread over life of loan on refinance). The sum of lines 808 and 802 equal the total the amount of points due on your loan.
810	Processing Fee	This is the charge for processing each loan package. A piggyback first & second loan combination will still have just one processing charge, normally $500.
811	Underwriting Fee	The lender must review and verify each loan to insure that it fully meets all the loan guidelines for the loan program.
These items are required by the lender to be paid in advance:
901	Prepaid Interest	This is the interest charges for the number of days prior to the first day of the following month. This charge puts borrowers on a normal cycle of mortgage payments due on the first of the month.
902	Mortgage Insurance Premium	For borrowers who must pay PMI, this is the cost of opening up the policy. Our take on PMI is that it can be avoided. We usually suggest home mortgage alternatives that do not require PMI.
903	Hazard Insurance Premium	If a hazard insurance policy is not opened separately, this is the cost of opening a policy with an insurance company associated with the lender.
905	VA Funding Fee	For borrowers who obtaining a mortgage using VA benefits, this is the premium for obtaining the loan.
These items are associated with Impound/Escrow accounts:
1001	Hazard Insurance Premiums	If you choose to include hazard insurance with your monthly principal and interest payments (recommended) then you may have to deposit the equivalent of 2-6 months of payments upfront.
1002	Mortgage Insurance Premium Reserves	If you are required to pay mortgage insurance and choose to include them with your monthly principal and interest payments (recommended) then you may have to deposit the equivalent of 2-6 months of payments upfront.
1004	Tax Reserves	If you choose to include property taxes with your monthly principal and interest payments (recommended) then you may have to deposit the equivalent of 2-6 months of payments upfront.
These items are associated with property title:
1101	Closing or Escrow Fee	This fee is for performing the escrow process.
1105	Document Prep Fee	The charge for preparing all the documents for signing, notarizing, and recording.
1106	Notary Fees	The total for notarizing all signed documents requiring notarization.
1107	Attorney Fees	Some states require an attorney handle the closing. If you live in one of those states this is our estimated fee for their services. The mortgage company does not set this fee, and you are free to negotiate this with the attorney you select to handle your closing.
1108	Title Insurance	The cost of the title insurance policy. Its cost is based on the loan amount.
	Recording Fee	The costs for recording the property title and mortgage in the county clerk's office.
	Courier/Wire Fee	The fees for transferring documents and funds from one location to another.
	Flood Certification Fee	Cost of the flood zone determination to confirm if the property is /is not in a flood zone.
These items are associated with property taxes:
1201	Recording Fees	To create a public record of your legal ownership of the property, the lenders notify the county government to record the transaction. The recording fee, which varies by state, is paid to the county.
1202	City/County Tax Stamps	Stamps, affixed to the deed, showing the amount of transfer tax paid. Most states stamp the deed rather then actually affixing a stamp. Many localities collect a transfer tax whenever a property changes hands.
1203	State Tax Stamps	Stamps, affixed to the deed, showing the amount of transfer tax paid. Some collect a mortgage tax anytime a new mortgage is recorded.

Next Steps

Click on feedback or call (866) 822-8500 for assistance - Last Updated:

This Website is NOT intended as a solicitation to customers in any jurisdiction in which we are not authorized to operate.

© Lightning Mortgage 2002-2008 All Rights Reserved. No part of this website may be reused commercially without the expressed
written consent of Lightning Mortgage. This site is directed at, and made available to, persons in the continental U.S., Alaska and Hawaii only.

Now You Can Learn Those Closely Guarded Mortgage Secrets and Save Thousands!

I'll show you step-by-step exactly what to look for and avoid when obtaining or refinancing a mortgage - especially if you've owned a home before.

Pleasanton, California

Dear Friend,

Of course, you want to pay the least for owning your home.

But you're received conflicting, confusing advice, and you don't know where to turn. You want to pay the least amount both at closing and with your monthly payments, and you should!

That's where I come in. I have saved thousands of home owners millions of dollars over the years. It has been my lifelong goal.

In the past 20 years money-saving strategies have changed as mortgage types and loan programs have multiplied. Over the years I've discovered exactly what works and what doesn't work when it comes to paying the least amount to own the same house.

Keep reading, and I'll show you exactly what works and what does not work when it comes to saving you the most amount of money.

The first thing we need to do is get you to understand what you're up against. Well-meaning family members and friends sometimes pass along misleading tactics and along with advice for avoiding bait-and-switch schemes as you discuss your plans for buying or refinancing a home.

Other times ill-informed or unethical real estate professionals deliver the information to you. They really aren't at fault.

Part of the problem is our own addiction to strategies that never work...

Four strategies for saving money that never work

...Yet people always try

The first is to scan the newspaper and look for the lowest advertised interest rate. Since interest rates are subject to change at least daily, the rate you'll receive has as much similarity to the advertised rate as today's winning lottery numbers have to tomorrow's numbers.
The second strategy is to partially fill-out loan applications on the Internet. You expect for lenders to "fight for your business" and judge the winner as the one who quotes you the lowest rate. This never works because there are too many unknowns and assumptions made.
The third strategy is leaving the choice to your real estate agent. Agents may have the best of intentions, but don't necessarily understand mortgage financing. Would you expect your psychologist to be up on the latest bone cancer treatments?
The fourth strategy is to just go to your local bank. If you are satisfied with any loan offered to you, then just trot down to your local bank.

You see banks have many different products (savings accounts, checking accounts, travelers checks, credit cards, ATM cards, Christmas accounts, car loans, etc.), but usually offer very few choices of loans.

If you think they'll make it easier to qualify since you have a savings account with them, think again. Loan underwriting qualifications do not check simply because you have been a customer of theirs all your life.

My strategy is to use the most appropriate loan product for each borrower's particular needs. It is not a matter of finding the best 30-year fixed rate mortgage. An interest-only mortgage may be most appropriate for you.

Is a second mortgage a better solution than a home equity line of credit?

Is really depends on how you'd like to repay the loan and how much you can afford to pay each month.

How can a person save money using negative amortization when the loan amount is going up as opposed to a traditional mortgage with the principal is being paid down?

You bet, but this option might not be right for you.

So what's the best way to obtain a mortgage?

Many people take a pessimistic view. They figure there's too much to learn, too many options. They just want to move into the home of their dreams, and be done with it. Spending a few dollars more each month is no big deal. Well, they are wrong.

Would you needlessly spend $50,000 to $200,000 more for a home than you need to pay? Probably not. But if you accept the wrong loan you could wind up over-paying even more for the same house.

What you Can Do Right Away to Turn The Tide in Your Favor

Buying a home is one of the most stress-filled, and most expensive, things that most of us will ever do. Here are three things that can make a difference:

I've discovered that arming yourself with knowledge about your loan options is the best defense against paying more than you need to pay when buying and owning a home.
Having a clear overall financial picture, and how your mortgage fits into that picture.
Working with and obtaining advice from a trusted source, a down-to-earth, level headed expert.

I am available to help you obtain the right mortgage. One that will meet your needs. Sign-up to receive strategies that will save you money, big money. I discuss many of them in my free Mortgage Insider Secrets series. This information will be emailed to you in weekly messages.

Sincerely,

Anthony Ferlazzo
Mortgage Consultant

Rest assured, we respect your privacy and will not give your email address to anyone under any circumstance.

Sign Up and You'll Enter Our Web Site, Too!

Understanding the

Good Faith Estimate

Good Faith Estimate

These items are payable in connection with the loan:

These items are required by the lender to be paid in advance:

These items are associated with Impound/Escrow accounts:

These items are associated with property title:

These items are associated with property taxes:

Next Steps

Now You Can Learn Those Closely Guarded Mortgage Secrets and Save Thousands!

Four strategies for saving money that never work...Yet people always try

What you Can Do Right Away to Turn The Tide in Your Favor

Sign Up and You'll Enter Our Web Site, Too!

Four strategies for saving money that never work

...Yet people always try