Lenders Won't Give Me a Good Faith Estimate

Dear Liz,

I have been shopping for a home loan and trying to compare mortgage rates. I'm running into trouble, however, when I ask for a Good Faith Estimate (GFE) the way I'm supposed to. Most lenders won't give it to me and insist on making up a worksheet instead. Yet I know that only a GFE is "official" and the other thing guaranties nothing. How can I get a GFE? Don't they have to give me one by law?

Ed in Anchorage

Dear Ed,

There is a lot of confusion surrounding the new form, but in general it is a good thing for mortgage shoppers and reputable lenders. The new GFE clearly shows the important terms and features of the loans you are considering, and when a lender discloses a fee on the form, it has to be accurate--mistakes beyond allowable tolerances must be absorbed by the lender, not you.

The new GFE increases the lender's risk.

This makes many lenders reluctant to commit to fees like title charges that go to third party providers until they are required by law to do so. Shopping for a mortgage and asking about rates does not trigger a legal obligation to provide you with a GFE, and doing so carries risks to lenders. For instance, if a loan processor or agent prepares a GFE and inputs title charges of $1,000 and the title company's actual charges are $1,400, you have to pay only $1,100 (the estimated charges plus an allowed 10% tolerance), and your lender has to pay the remaining $300. That may be the entire profit on your home loan!

The new GFE makes it easier to find the best mortgage rates.

In addition, some are reluctant to provide interest rates early in the process because the further you have progressed in your mortgage application process, the less likely you are to shop around and start over with someone else. An article in Mortgage Professional Magazine advises loan officers to delay providing a GFE as long as possible, to refuse to guaranty an interest rate beyond one day, and to leave all the voluntary portions of the form blank. The author states that giving out this information only allows applicants to "shop you out of business."

So when is the lender required to issue a GFE?

You don't have to actually apply for a loan to get a new GFE, but you must be willing to provide the lender with some pretty personal information. Here is what triggers the requirement for a GFE:

• Your full name
• Your Social Security number
• Your monthly income
• Property address
• Property value or sales price
• Loan amount

Once the lender has these pieces of information, it must issue you a GFE within three days. In addition, inform the agent about the property use (second home, primary residence, or rental), and property type (single family residence, condo, manufactured housing), because these factors can drastically change the cost and parameters of your mortgage. See how long the interest rate is guaranteed (don't expect it to be a long time because mortgage interest rates move with financial markets and can change more than once a day). Also, know that any change in income, loan program, property value/sales price, locking your rate, or a lock expiration, can trigger a new GFE with different costs. And it's the final GFE that must substantially match your settlement statement. So shop now, and unless you lock your interest rate right away, shop again when you prepare to lock to make sure you're getting a good deal.