What is the purpose of a good faith estimate in the mortgage process?

The purpose of a good faith estimate in the mortgage process is to provide an estimate of the borrower’s closing costs. This document gives borrowers an overview of the fees associated with the loan, which typically include items such as lender fees, title insurance, appraisal costs, and other related expenses. By offering a detailed breakdown of these costs, the good faith estimate helps borrowers understand what they will be required to pay at the closing of the mortgage.

This transparency allows borrowers to compare different loan offers and make informed decisions about which mortgage product best suits their financial situation. It is essential in promoting clarity and fostering trust between lenders and borrowers during the mortgage process. This document is required by law under the Real Estate Settlement Procedures Act (RESPA), ensuring that borrowers receive this information in a timely fashion.