What exactly is a good faith estimate and why should you absolutely want one?

A Good Faith Estimate is an estimate of all the costs associated with a mortgage.  These costs include your interest rate, any points, and lenders fees.   If you go to a loan officer at a local bank or a mortgage broker and he or she qualifies you and quotes you a rate, a payment, and your total costs, he should be able to give you a good faith estimate in writing on a standard form.

Don’t find out about some hidden fee or the fact that the rate quoted you was for an adjustable rate mortgage at closing.  By law, your lender must provide you with a good faith estimate, be it an FHA or conventional one, so it is important that you obtain one and read it carefully.  If there’s anything on it you don’t understand, ask your loan officer to clarify it.

In 2010 new laws will go into effect making the good faith estimate even more informative for borrowers.  Take a look at this New York Times article for more details.

After you’ve read your good faith estimate carefully and you’ve gotten a good explanation of all the charges on it and you’ve found them to be acceptable, you can be confident that you won’t get any unpleasant mortgage related surprises later on.