Knowing what good faith estimates entail

If you are considering a home purchase in the midst of the current economic recession and financial crisis, you ought to know how to ensure that you can afford and finance the different fees needed for your purchase.

For instance, a mortgage is provided in order to financially assist homebuyers who do not have enough resources and funds to make the transaction. The federal government itself is encouraging more individuals to consider home acquisition; therefore, home loans are becoming viable options again. In relation to securing a mortgage for your home buying pursuits, you need to study and understand the different components involved, such as a good faith estimate.

A good faith estimate–what does it mean?

A good faith estimate is referred to as the required list of necessary charges and costs that mortgage providers or brokers must provide for their customers in adherence with the Real Estate Settlement Procedures Act or RESPA. For instance, it is inclusive of the different itemized fees, charges and costs that are incurred in securing a home loan. This list must be provided within three working days following your loan application.

The fees mentioned here are considered settlement or closing costs and include coverage for title insurance, taxes and home inspection among others. Good faith estimates refer to the standard form used as basis of comparison on all other quotes or offers by the various lenders or brokers.

What is included in the list?

Here are the most common and important fees or charges found in your estimate:

Taxes and other tax related fees: Taxes are the legal financial obligation of individuals and must be given utmost priority when purchasing a house. Tax-related fees, which pertain to the certified tax amount incurred for the purchase of the property, how much the house is worth and the corresponding taxes that are due, are included in your list.

Origination fees: These are charges brokers and mortgage providers impose on their borrowers for the service they have rendered in the process of securing the loan. Origination fees can be manifested through a point system, and borrowers have the option to choose the payment mode they prefer. They can either pay the broker directly or include the payment in the mortgage by increasing the amount they are required to pay monthly. The fee is also expressed either through the percentage of the loan value or in a flat dollar rate, whichever the involved parties agreed upon.

Discount fee: This refers to the points the borrower is entitled to and results in a greater chance of lowering the interest rate paid on a monthly basis.

Securing a mortgage for your home acquisition is a very tedious and rewarding task. Hence, you need to comply with all the requirements, especially in dealing with a good faith estimate. These are basically estimates, and the final closing cost depends on the price settled upon through your negotiation efforts.

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