How a Good Faith Estimate Helps Homebuyers Understand Costs?
July 30, 2025
8 minutes
Let’s be real: Buying a home can feel like decoding a different language. Just when you think you’ve figured out your budget, your lender hands you a document filled with line items you don’t fully understand. Sound familiar?
That document is called a Good Faith Estimate (GFE), and if you’re navigating a home purchase or refinance, it could be one of the most powerful tools in your corner.
Key Takeaways:
- A Good Faith Estimate (GFE) outlines estimated mortgage loan costs.
- It helps homebuyers compare offers and avoid hidden fees.
- Although replaced by the Loan Estimate for most loans, GFEs still appear in certain transactions.
- Understanding GFEs empowers borrowers to make smarter, more transparent financial decisions.
What Is a Good Faith Estimate?
A Good Faith Estimate is a standardized form that breaks down the estimated costs of a mortgage loan. It was designed to help borrowers compare offers across different lenders and make more informed choices.
Why it matters:
- Gives a breakdown of key loan costs: origination fees, interest rate, escrow, taxes, and title charges.
- Offers a clear view of what you might pay at closing.
- Enables smart comparisons across lenders.
Heads up: Since October 2015, the Consumer Financial Protection Bureau (CFPB) replaced the GFE with the Loan Estimate for most consumer-purpose mortgages under TRID rules. But GFEs are still used for:
- Reverse mortgages
- HELOCs (Home Equity Lines of Credit)
- Certain investment or business-purpose loans
Key Sections of a Good Faith Estimate
Understanding the parts of a GFE is key to spotting red flags or unexpected costs. Here's what you’ll typically see:
1. Loan Terms
- Loan amount
- Interest rate (note: not the APR)
- Term (15, 20, 30 years)
2. Origination Charges
- Lender fees
- Underwriting fees
- Processing fees
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3. Third-Party Services
- Title insurance
- Appraisal
- Survey fees
4. Prepaids & Escrow
- Taxes
- Insurance
- Prepaid interest
5. Government Charges
- Recording fees
- Transfer taxes (varies by state)
Why It’s Still Useful in 2025?
Even in the Loan Estimate era, GFEs can still be helpful:
- Transparency: No one likes surprises at the closing table.
- Comparisons: Allows you to shop around without making assumptions.
- Negotiation leverage: Spotting inflated fees gives you bargaining power.
Pro Tip: Ask your lender for both a GFE and a Loan Estimate if you qualify for both types of documentation. You’ll get a fuller picture.
How to Compare Good Faith Estimates Across Lenders?
Just because a lender gives you a GFE doesn’t mean they’re offering the best deal. Use the GFE as a side-by-side comparison tool.
What to Focus On:
- Origination charges: These vary widely and are where lenders often pad fees.
- Interest rate vs. APR: The GFE doesn't include APR, so check this separately.
- Total estimated settlement charges: See where money flows.
Red Flags:
- Vague line items.
- Excessive processing or application fees.
- Missing fees that might appear later.
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Conclusion: Understand Costs, Shop Smart, and Choose the Right Partner
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FAQs
What replaced the Good Faith Estimate?
The Loan Estimate replaced the GFE for most home loans in 2015 under the TRID rule. However, GFEs are still used for reverse mortgages and some business-purpose loans.
Is a Good Faith Estimate binding?
No, it’s not binding. It’s an estimate, and final numbers may vary. However, lenders are bound to honor certain costs within a specific tolerance range.
Can I request a GFE before applying?
Yes, if your loan type qualifies (like reverse or business-purpose loans), you can request a GFE to preview estimated costs.
What’s the difference between APR and interest rate?
Interest rate is what you pay annually to borrow money. APR (Annual Percentage Rate) includes interest and fees, offering a more complete view of loan costs.
Why do some lenders still use GFEs?
Lenders use GFEs for loan products not covered by TRID, such as HELOCs and investment-purpose mortgages.
Disclosures: reAlpha Mortgage, NMLS #1743790, is an Equal Housing Lender. This content is for informational purposes only and does not constitute legal, financial, or mortgage advice. Mortgage eligibility and rebate amounts vary based on buyer profile, location, and loan type. Rates and terms are subject to change. The reAlpha buyer rebate offer applies only to home purchases made through the reAlpha platform using affiliated agents, lenders, and title providers. Please consult a licensed professional for personalized advice.
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Article by
Rocky Billore is a mortgage industry leader and Chief Sales Officer with over two decades of experience across residential and commercial lending. Since entering the industry in 2004, he has been directly involved in funding more than $1.4 billion in loans. A recognized expert in VA and government lending, Rocky combines deep program knowledge with a data driven, relationship-first leadership style. His work focuses on building scalable sales organizations, developing high performing teams, and aligning technology with real world lending outcomes to improve the homeownership experience.