What Is a Good Faith Estimate?

The good faith estimate is a document that a mortgage lender will provide to a potential borrower before a mortgage loan takes place. This document outlines all of the fees and costs associated with getting a mortgage. This is a very important document for individuals who are shopping for mortgage loans. Here are the basics of the good-faith estimate that is provided by mortgage lenders.

Good-Faith Estimate

Mortgage lenders are required to provide a good-faith estimate to a potential borrower within three days of applying for a mortgage. This is required by law and the potential borrower has to review the estimate and sign it before the lending process can continue. If you receive a good-faith estimate, it is important to realize that these numbers are only estimations of the final costs. There are many different closing costs that you could be charged and the final numbers could be slightly different from what you are looking at on the estimate.

This form that is distributed to potential borrowers is a standardized form that is the same for every mortgage lender. The industry set this up so that it would be easier for individuals to compare costs from one lender to another.

Costs and Fees

On the good-faith estimate, you will typically see several charges and fees that lender will charge you when you go through with the mortgage. Each fee on the good-faith estimate has a corresponding number associated with it. These numbers start at 800 and go upward. There are also categories that begin with 900, 1000, 1100, 1200, and 1300. Every lender will use the same number corresponding to each fee so that it is a standardized procedure.

One of the fees that you will most likely see on the estimate is the origination fee. This is a fee that is charged by the lender for creating the loan. This fee helps compensate them for the work of getting everything set up for you. Some mortgages will also charge discount points to the borrower. One discount point is equal to one percent of the value of the loan. This fee is charged in order to buy down the interest rate that an individual pays on their mortgage.

The appraisal fee is another fee that you will most likely be charged. This fee goes to pay for the appraiser to determine the value of the property that is going to secure the loan. You may also have to pay fees to secure a credit report and for a property inspection. 

Many lenders also charge processing fees and underwriting fees. These fees help cover the costs of processing the loan documents and making the lending decision on the loan.


If you are a potential borrower, the good-faith estimate is a very important document so that you can compare rates, costs and fees. In most cases, you will be shopping around for a mortgage and this can be a very valuable tool to help you compare one lender against the other.

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