The Function of a Lender's Good Faith Estimate

By Allan Joseph, Columnist
06/30/2003

Often buyers and buyer’s brokers assume that the Good Faith Estimate prepared by a mortgage broker or lender will list the exact charges that are to be paid by the buyer at closing. The issue then becomes: Under Federal Law, does the Good Faith Estimate have to be “exact”? The Good Faith Estimate does not have to be exact and it is only an estimate or range of charges. For example, the lender may not know the costs for the closing agent that the buyer will choose, or the exact amount that will be collected for an escrow account for taxes and insurance. Federal law also does not give the buyer a right to sue if the charges that must be paid at closing are higher than those listed on the Good Faith Estimate. HUD recommends that the best protection is to let the lender and settlement agent know that the buyer will want to see the HUD-1 Settlement Statement one day in advance and that the buyer should question any amount that the buyer does not understand.