What Is A Good Faith Estimate In Real Estate?
A good faith estimate in real estate was a document that a lender was required to provide an applicant in connection with a reverse mortgage, as explained by the Consumer Financial Protection Bureau. As a document, the good faith estimate included foundational information. This information covered the terms of the buyer's mortgage. Part of the purpose of this document was transparency for a home purchaser. In general, a mortgage shopper is someone who retains the right to explore other offers and maximize her spending (and encumbering) power in a market-competitive manner. For context though, a reverse mortgage is a type of home loan designed for senior citizens who are at least 62 years old, as Investopedia detailed.
Given the combination of the phrase good faith with estimate, some understanding of good faith may prove helpful. The Legal Information Institute has detailed how that the notion of good faith requires a sincere belief or purpose, the faithful performance of certain duties, and the absence of fraud.
In the more general sense, a standard good faith estimate would include cost projections for the mortgage loan. This estimate would also tend to include information that helped an applicant take several steps. These steps included comparing offers (recall the right to shop around when seeking a mortgage), comprehending the true cost for obtaining the loan, and reaching an informed decision about selecting a loan.
Changes in the mortgage process
As the real estate platform Zillow reported, a mortgage applicant was not required to accept any and every mortgage offer that she received. The real estate publication also observed that a few years ago statutory changes yielded a shift from market reliance on a good faith estimate to a document called the Loan Estimate and Closing Disclosure Form. As examples, the Consumer Financial Protection Bureau contains loan estimate and closing disclosure documents and sample documents that anyone with a WiFi connection may read or peruse.
Overall, the good faith estimate has value as a concept in recent history. When this estimate ruled the day, a lender would have provided the mortgage applicant with a good faith estimate within three business days. That time span would have operated after the applicant received the application or other necessary details. However, the applicant could not be charged additional fees until she not only received the good faith estimate document, but also demonstrated that she wishes to continue with the mortgage loan process. Buyers should know that property purchasing and lending rules frequently change.