What is a 'good faith estimate'?

A 'good faith estimate' refers to an estimate of the closing costs associated with a mortgage loan. This document is an important tool that lenders are required to provide to prospective borrowers under the Real Estate Settlement Procedures Act (RESPA). It breaks down the various fees and costs the borrower can expect to incur at closing, which may include loan origination fees, title insurance, appraisal fees, and other related expenses.

The purpose of a good faith estimate is to give borrowers a clear understanding of their potential financial obligations when finalizing their mortgage, enabling them to compare offers from different lenders. Being presented with this estimate helps borrowers make more informed decisions about their financing options, ensuring transparency and reducing the likelihood of unexpected costs during the closing process. The estimate must be provided promptly after a loan application is submitted, reinforcing the importance of clear communication in real estate transactions.

In contrast, the other choices do not represent a good faith estimate. An offer made by a buyer pertains to the negotiation phase of buying property, a summary of a property’s previous sales history provides insight into the market value and past performance of the property but does not relate to closing costs, and a legal document indicating the buyer's intent pertains more to the formal agreements in a transaction rather than the