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What is a Good Faith Estimate?

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Lenders are required by the federal Real Estate Settlement Procedures Act to provide you with a good faith estimate. A Good Faith Estimate provides you with an honest approximation of the settlement costs in closing your loan. The Good Faith Estimate includes every home-loan associated expense, such as inspections, title insurance, taxes and other charges. The Good Faith Estimate should also include your down payment balances and your prepaid expenses. By law, your lender must provide you with a Good Faith Estimate within three days of applying for your loan.

Because closing costs typically amount to between 3 and 5 percent of the sale price, it is best to wait until you receive the good faith estimate before signing any loan. In fact, smart shoppers will obtain good faith estimates from several lenders, compare their costs, then ask their chosen lender to meet or beat the competition's best offer.

Here's a list of some of the loan fees you'll find listed on your good faith estimate:

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