Three days after receiving your mortgage application, the Mortgage Company or broker is legally required to provide you the Good Faith Estimate for the loan you are applying. This estimate is supposed to itemize the total fees and costs you will pay closing on your mortgage loan. The degree of accuracy of your Good Faith Estimate is limited by the level of honesty of your mortgage company. The mortgage company is only required to provide you the Good Faith Estimate, they are not held to any standards for its accuracy.
Bad Faith Estimates technically violate the Real Estate Settlement Procedures Act; however, HUD does little to enforce the law. Despite its limitations, using the Good Faith Estimate is the best way to compare loan offers when mortgage refinancing. Closely review the Good Faith Estimate and you’ll find garbage fees, lender charges, and markups. Compare the Good Faith Estimate to your final settlement statement and you’ll find many mortgage companies slip in junk fees hoping you won’t notice.
Your best bet for mortgage refinancing without overpaying is to carefully shop form a variety of mortgage companies and request a copy of the Good Faith Estimate before submitting your application. Avoid using the Annual Percentage Rate to compare mortgage offers because it does not provide enough information to choose which loan is best. Mortgage representatives often try and distract you with the government approved Annual Percentage Rate while diverting attention away from the Good Faith Estimate filled with excessive fees and closing costs and charging you a non-refundable application fee.
Never pay a non-refundable application fee unless you are 99% sure that you have an accurate picture of all the closing costs, lender fees, and markup of that loan. You can learn more about mortgage refinancing while avoiding expensive homeowner mistakes by registering for our free six part video tutorial.