Closing Costs Explanation &
Sample Good Faith Estimate
Below is a sample Good Faith Estimate. It should be presented to you in this
format on this form, called the MLDS (Mortgage Loan Disclosure Statement).
Please note on the form what fees are paid to the mortgage company and what fees
are paid to third parties. Below this sample Good Faith Estimate is a more
detailed explanation of the costs and what the buyer
should expect in regards to this document.
Good Faith Estimate Explanation
During a real estate transaction, you will have costs associated with the
real estate transaction and costs associated with the loan.
The costs associated with the real estate transaction include at least the
following: earnest money deposit of usually between $1,000 and $3,000 paid up
front, an appraisal ($350 to $400), and a home inspection (approximately $200).
It is always a good idea to have at least several thousand dollars in your bank
account at the start of purchase of your first home.
The costs associated with the loan are what are called "Closing Costs." Many
of them are paid when the loan is closed, hence the term Closing Costs. At the
beginning of the transaction, the loan officer will provide the borrower with a
document called the Good Faith Estimate. This is supposed to be the loan
officer's best estimate of what all of the closing costs will be. If the loan
officer has properly and honestly prepared the Good Faith Estimate, there will
be closing cost surprises at the close of the loan. If the loan officer has
neglected to include some of the expected closing costs in the Good Faith
Estimate in order to make the total closing costs appear low in the beginning,
the borrower might unexpectedly have to bring in a large amount of money to the
close. I guarantee the closing costs on my Good Faith Estimate. Click here to
read my Written
Guarantee of Closing Costs.
The loan officer is required to provide you with a document called the Good
Faith Estimate no later than 3 days after a loan application is taken. The Good
Faith Estimate is the loan officer's best estimate of total closing costs for
the loan. Below is a sample Good Faith Estimate for a $400,000 purchase
loan. Each fee appearing on the Good Faith Estimate has an explanation next to
it. The Good Faith Estimate below has all of the fees relating to the loan that
the buyer will incur during a purchase transaction. If you receive a Good Faith
Estimate from a loan officer the has fees that are not listed below, those
additional fees are probably junk fees. If a loan officer provides you with a
Good Faith Estimate that is missing any of the fees listed below, the loan
officer has understated closing costs. The buyer will have to pay all of the
fees listed below, regardless of whether the loan officer has listed them in the
Good Faith Estimate. The main reason for closing table surprises is an
incomplete Good Faith Estimate. If you receive a Good Faith Estimate from
another loan officer and have questions, feel free to contact me about it.