Understanding The Good Faith Estimate - Part 3

In Part 1, we dicussed the items payable in connection to the loan. Part 2 covered the title and recording fees.?Today we will conclude with an explanation of lender required items, reserves, and the summary.

Items Required By Lender To Be Paid In Advance

Interest: Interest paid to the lender on loan from the date of closing through the last day of the month the loan closes in.? This amount will vary depending on the actual closing date and how many days remain in the month.?? The closer to the end of the month you close the lower the prepaid interest charge to you.

Mortgage Insurance Premium: This is for FHA homes only. Premium is usually financed into the loan amount.

Hazard Insurance Premium: If hazard insurance is not impounded the payment for the premium will show here.

Reserves Deposited With Lender

Hazard Insurance Premium: If insurance is being impounded and made a part of your monthly payment it will show here. The lender will hold 3 - 6 months of insurance premium.

Mortgage Insurance Premium: Any first mortgage that includes mortgage insurance (1st liens over 80% loan - value) will be listed here. Not all 1st liens over 80% have mortgage insurance. Some factor this into the rate.

School Tax: If your area has a school tax it would show here.

Taxes and Assessments: Property Tax and assessments are shown here. Lenders withhold up to 6 months of property taxes when issuing a loan with impounds. The amount depends on what month the loan closes. All deposits for taxes and assessments show here.

Flood Insurance Reserves: Depending on where you live, lenders may require flood insurance and any impounds for that premium will be shown here.

Total Estimated Settlement Charges

This will show a total of all charges listed on the Good Faith Estimate including all broker and lender points, fees, title and escrow, appraisal, etc. Everything listed on the GFE. Any credits provided will show in the appropriate category as a seperate line item and showing as a credit. The total reflected here will already take all credits into account.

Compensation Paid to Broker

This will list anything the broker is receiving in a rebate from the lender. If it is not shown on your GFE then request the Mortgage Loan Disclosure Statement which will have that information. The number listed here is NOT a part of your costs and is not paid out of your proceeds.

Summary

The bottom of the GFE will summarize your loan and will indicate payoff amount (or purchase price), loan amount, total closing costs, total reserves to be held, total non impounds, seller contributions, and a complete payment breakdown.

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