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Understanding the Good Faith Estimate

In my recent blog, Survey Says . . ., I pointed out how important it is for Realtors to educate their clients in ways that make the home buying process smooth and successful for everyone.  One of the subjects I mentioned was the Good Faith Effort (GFE). 

A confident, well-informed client is more likely to make sound decisions on a timely basis, something good for any Realtor.  Let’s dig a little deeper on what the GFE is and how best to explain it to your clients. 

Keep it Simple

Clients want information, but they want it in a way they understand, free from industry jargon and confusing terms.  One way to describe the GFE is as an early snapshot of their mortgage loan, the financial part of home buying.  Help them understand the most important points and how to best use this document. 

A good way to approach the GFE is to read the document fully once, then go back over it looking at specific key points.  Here are some of the points that offer helpful information.

Dates

This section is right up front.  Explain the importance of knowing when the interest rate lock ends and the other time sensitive matters.  If the client uses an electronic calendar, suggest imputing important dates. 

Summary

Probably the most important area for buyers, this section covers the loan term, the rate, the monthly payment, and answers some frequently asked questions.  Adjustable rate loans, prepayment penalties, and balloon payments will be covered here.   These are major factors that clients will want to understand fully.  Time spent here can avoid conflict later. 

Escrow Account

Some loans require that homeowner insurance and property taxes be collected monthly and placed into an escrow account.  Let clients know that this is truly the good news / bad news situation.  While their monthly payment goes up, they won’t have to write big checks for these costs annually. 

Settlement Summary

Clients that want the bottom line should study this section, referring to the next two pages as necessary. 

Loan & Closing Costs

After the buyer recovers from the sticker shock of home prices, this is the next list of costs.  If the loan includes points, be sure the client understands how they work as a trade-off of a one-time charge that lowers monthly payments. 

Most of the charges in this section are self explanatory, but from time to time there will be acronyms that may be confusing, like “VOE” for verification of employment.  A client that understands these things is less likely to be apprehensive about the process. 

Finally, this section probably includes a charge for the first year’s homeowner’s insurance premium.  Remind the client that this is a big bill they won’t have to pay again for a full year. 

Shopping Guide – Page Three

The last page of the GFE is part education and part worksheet.  Encourage clients to read it for good information about the loan process and to check out other lenders.  Just because you have a checking account at the local bank doesn’t always mean they will offer you the best mortgage.  Encourage clients to be good shoppers; just keep them mindful of important processing deadlines.

Hopefully this has given you some ideas on how you can make clients more comfortable with the mortgage part of home buying experience.  After all, a happy, comfortable client makes for a better overall experience for everyone.