Borrowing a home loan is a financial decision that can influence the rest of your life in one way or another. Though there are mechanisms in place to help guide you through the journey, you will be required to take several tough decisions up till the closing date. One way you can get help as a home buyers is through a good faith estimate (GFE). As a mortgage applicant, your lender is liable to provide you with a GFE that contains all the information related to the mortgage, including how much the loan is going to cost at the given rate. Having cognizance of your Good Faith Estimate helps you make fair mortgage comparisons from different lenders and get a better understanding of your loan and APR. This post highlights specific ways in which a good faith estimate benefits homebuyers.
1. Limits Ambiguity
The GFE was established to protect buyers from having to pay for any unlisted costs and responsibilities incurred at the time of closing, and most importantly, to avoid any unexpected financial obligations. Through the GFE, buyers are well aware of all costs involved throughout the process before agreeing to anything. This, in turn, limits the ambiguity of costs related to a particular loan and help buyers make informed decisions.
2. Helps you Stay within your Budget
More often than not, home buyers have bruising experiences with home loans due to lack of a clear understanding of the monthly costs involved in their home mortgage agreement. The GFEs help buyers know exactly how much of their income will be going towards loan repayment and other associated fees every month. Getting a comprehensive breakdown of monthly costs helps borrowers have a realistic viewpoint of how the loan is going to affect their budget. If the monthly payments are more than their budget, people get the option to look for other houses available at a lower price.
3. Empowers you Better Evaluate your Credit & Finances
As the GFE process involves an in-depth analysis of a borrower’s credit and financial status, having the evaluation done by more than one lender helps you understand your financial stability before committing to anything. If the credit report is the reason for inflated interest rates, you can always come back after six months with a better credit status. This benefit is usually overlooked by many borrowers but makes for a great deal in the form of reduced interest rates.
Getting good faith estimates from different lenders helps home buyers invest more efficiently in a new property. After you apply for a home loan, you receive an itemized list of all associated costs in the form of a GFE form within three business days. People who are willing to put their money in the market should leverage the benefits of GFEs to cover themselves. Seek assistance from a professional loan consultant who can guide you through the process to help you choose the right kind of loan program with best interest rate.