What is a GFE in mortgage lending?

A Good Faith Estimate (GFE) is a crucial document in mortgage lending that provides borrowers with a clear understanding of the costs associated with their loan. The GFE outlines estimated costs for various fees and services associated with the mortgage process, including lender fees, title insurance, and various closing costs. This estimate is designed to help borrowers make informed decisions about their mortgage options and to compare different loan offers.

The primary purpose of the GFE is to promote transparency and help prevent unexpected charges at closing. It provides borrowers with a reliable estimate so they can budget accordingly and assess offers from different lenders effectively. Although the GFE has been largely replaced by the Loan Estimate form under the TILA-RESPA Integrated Disclosure rule, historically, it represented a commitment from the lender to provide services at the quoted rates, thus reinforcing the importance of good faith in the lending process.

This term serves to clarify expectations and safeguard the borrower’s interests throughout the mortgage transaction, highlighting its essential role in maintaining trust and transparency between lenders and borrowers.