Good Faith Estimate (GFE)

The good faith estimate (GFE) is one of several government-required disclosures that you will receive at the time of or within three days after application. It is a legal requirement that all lenders must follow.
The GFE provides the borrower with an honest approximation of the closing costs, down payment balances, prepaid expenses and all other charges that the borrower must address at the closing. The borrower should hold the lender to this estimate, with some obvious leeway. The lender must inform the borrower immediately of any changes in the loan program, rate, pricing and closing costs. Obviously, the lender can only guess at the time of application what expenses such as attorney fees, title charges, investor fees, inspection costs and other such variable expenses will be. These expenses are set by other parties or chosen by the seller or buyer, not the lender. However, the lender should be accurate with its own fees. As a rule of thumb, the borrower should be concerned if the final closing costs are more than 15% higher than the estimate. The exception is if the borrower is fully informed by the lender beforehand that these items will be higher, and the borrower accepts. Note also that other expenses not anticipated by the lender may appear during the processing period. If they are legitimate, they will often be unavoidable.