Do I have any recourse against a bad faith estimate?

The good faith estimate (GFE) is one of several government-required disclosures that you will receive at the time of or within three days after application. It is a legal requirement that all residential mortgage lenders must follow. The borrower should hold the lender to this estimate, with some obvious leeway. The good faith estimate is subject to change, but the lender has an obligation to immediately disclose those changes as soon as they are known. The lender must inform the borrower immediately of any changes in the loan program, rate, pricing and closing costs. As a rule of thumb, the borrower should be concerned if the final closing costs are more than 15% higher than the estimate.

The exception is if the borrower is fully informed by the lender beforehand that these items will be higher, and the borrower accepts. Note also that other expenses not anticipated by the lender may appear during the processing period. If they are legitimate, they will often be unavoidable. There are numerous ads today talking about no fee mortgages, but all of these may not be trust worthy. The fees in such cases may be in a disguised form like higher interest, high prepayment penalty or high margins. So you need to be more evaluative about the overall costs checking the terms of the mortgage thoroughly.

Any confusion that may arise can be cleared out with a reliable mortgage professional. The most important source of information on the fees aspect of a particular home loan is the good faith estimate (GFE), which is provided by the lender. Now we will take a look on how to use this document for the evaluation purpose. The GFE contains all the relevant information about the mortgage like the rate of interest, the term of loan, the amount of loan and the details and split-up of all the settlement costs related to the loan. And as per the federal law the borrower must be provided with a GFE within three days of his loan application. The fees on the document are listed under three main headings Rate of interest and discount points; Fixed dollar loan fee and; Third party charges. The unreliable lenders can easily use figures under each of these categories to trick the borrower, as the lender cannot be held liable for errors in this document as per law. Still it is the most evaluative tool and the lender can easily withdraw his loan application if he finds that there is too much of a difference when comparing it with the final settlement document.