Page 3 of the GFE

    Page 3 of the GFE contains important instructions and information that will help you shop for the best loan for you.

Understanding which charges can change at settlement

    There are three different categories of charges that you will pay at closing: charges that cannot increase at settlement; charges that cannot increase in total more than 10%; and charges that can increase at settlement.  You can use this as a guide to understand which charges can or cannot change.  Compare your GFE to the actual charges listed on the HUD-1 Settlement Statement to ensure that your lender is not charging you more than permitted.

     Written list of settlement service providers

    A written list will be given to you with your GFE that includes all settlement services that you are required to have, and that you are allowed to shop for. You may select a provider from this list or you can choose your own qualified provider.  If you choose a name from the written list provided, that charge is within the 10% tolerance category.  If you select your own service provider, the 10% tolerance will not apply.

    Even though you may find a better deal by selecting your own provider, you should choose the provider carefully as those charges could increase at settlement.  If your loan originator fails to provide a list of settlement service providers, the 10% tolerance automatically applies.



Using the tradeoff table

The “tradeoff table” on page 3 will help you understand how your loan payments can change if you pay more settlement charges and receive a lower interest rate or if you pay lower settlement charges and receive a higher interest rate.

    The loan originator must complete the first column with information contained in the GFE.  If the loan originator has the same loan product available with a higher or lower interest rate, the loan originator may choose to complete the remaining columns. If the second and third columns are not filled in, ask your loan originator if they have the same loan product with different interest rates.

Using the shopping chart

    You can use this chart to compare similar loans offered by different loan originators.  Fill in each column with the information shown in the “Summary of your loan” section from the first page of all the GFEs you receive.  Compare each offer and select the best loan for you.

Page 2 of the GFE

    The price of a home mortgage loan is stated in terms of an interest rate and settlement costs. Often, you can pay lower total settlement costs in exchange for a higher interest rate and vice versa.  Ask your loan originator about different interest rates and settlement costs options.




Your Adjusted Origination Charges, Block A

   

    Block 1, “Our origination charge” contains the lender’s and the mortgage broker’s charges and point(s) for originating your loan. 

    Block 2, “Your credit or charge point(s) for the specific interest rate chosen.”

o    If box 1 is checked, the credit or charge for the interest rate is part of the origination charge shown in Block 1.
o    If box 2 is checked, you will pay a higher interest rate and receive a credit to reduce your adjusted origination charge and other settlement charges.
o    If box 3 is checked, you will be paying point(s) to reduce your interest rate and, therefore, will pay higher adjusted origination charges.

Note: A point is equal to one percent of your loan amount.

    After adding or subtracting Block 2 from Block 1, “Your Adjusted Origination Charge” is shown in Block A.

    In the example shown, the origination charge is $6,750.  No points were paid to reduce the interest rate. Instead, because of the interest rate chosen, the offer contains a $3,000 credit that reduces the adjusted origination charge to $3,750. 


Your Charges for All Other Settlement Services, Blocks 3 through 11

    In addition to the charges to originate your loan, there are other charges for services that will be required to get your mortgage.  For some of the services, the loan originator will choose the company that performs the service (Block 3). The loan originator usually permits you to select the settlement service provider for “Title services and lender’s title insurance” (Block 4).  “Owner’s title insurance” is also disclosed (Block 5).  Other required services that you may shop for are included in “Required services that you can shop for” (Block 6).



    Block 3 contains charges for required services for which the loan originator selects the settlement service provider. These are not “shoppable” services and often include items such as the property appraisal, credit report, flood certification, tax service and any required mortgage insurance.

    Block 4 contains the charge for title services, the Lender’s title insurance policy and the services of a title, settlement or escrow agent to conduct your settlement.
 
    Block 5 contains the charge for an Owner’s title insurance policy that protects your interests.   
        
NOTE:  Under RESPA, the seller may not require you, as a condition of the sale, to purchase title insurance from any particular title company. 

    Block 6 contains charges for required services for which you may shop for the provider.  Some of these items may include a survey or pest inspection.

    Block 7 contains charges by governmental entities to record the deed and documents related to the loan.
  
    Block 8 contains charges by state and local governments for taxes related to the mortgage and transferring title to the property.
 
    Block 9 contains the initial amount you will pay at settlement to start the escrow account, if required by the lender. 

    Block 10 contains the charge for the daily interest on the loan from the day of settlement to the first day of the following month. 

     Block 11 contains the annual charge for any insurance the lender requires to protect the property such as homeowner’s insurance and flood insurance. 

Total Estimated Settlement Charges

       
     “Your charges for All Other Settlement Services”, Blocks 3 through 11, are totaled in Block B.  Blocks A and B are added together resulting in the total estimated settlement charges associated with getting the loan. These Blocks are carried forward to the bottom of page 1 of the GFE.

New Good Faith Estimate

The new RESPA rules have created many changes to the industry including a additional information added to the Good Faith Estimate (GFE). A GFE is a form provided to a potential borrower by a mortgage professional to help the borrower better understand the terms of the loan and settlement charges associated with the mortgage.

The new changes to the good faith estimate were designed to help borrowers better compare different options and lenders. There is a debate on whether these changes were necessary. This is a decision for each individual and I'm sure both sides hold merit.