Lenders are obligated by truth in lending laws to supply mortgage applicants with a “Good Faith Estimate” (GFE) of the costs of closing on the home loan, within 3 days of the application.

The GFE should list the entire terms of the mortgage, including the period, rate and points (which most borrowers know before they apply), but most importantly the closing costs.

Since the law does not say that these costs are presented in the same manner, or even called by the same term, it is difficult to understand them.

This makes it hard for the borrower to understand exactly what he is paying for.

When you receive your GFE, you will have the opportunity to examine these costs in the “Total Estimated Funds Needed to Close” area. In this statement, you can see the fees you will have to cover when you close.

The loan origination fee is usually one of the largest costs. This fee varies a great deal, from smallish flat fees, all the way to as much as 2% of the value of the loan. As you can imagine, this can be a large number, and the borrower should make sure he agrees with it.

The appraisal fee is one of the first charges, and of course, the lender does have to conduct an appraisal. Just check with another appraisal company to see if the fee is in line with the going rate. The three day review period allows you the time to do this.

The lender should also list the processing fees concerned in the loan. This item is for the time spent by the lender in gathering all of the information and paperwork together to process the loan. They may list them separately as application fees, copying fees, administration fees or others. In many cases, lenders can negotiate these costs.

The underwriting fee is another fee on the closing statement. This fee represents the cost to the lender of making sure you are a creditable applicant, such as reviewing the application, the credit report and your employment history, as well as the review of the appraisal. This is the information needed to make the determination about the mortgage.

Next, look at the title fees and attorney’s costs. You can pick your own closing attorney to have control over this fee.

The mortgage broker’s fee will be listed, if you are responsible for paying the commission. Many times there is no commission listed, which means that the bank is paying the mortgage broker. If the buyer has to pay, he may have some discretion in how hight they are.

There are some fees that are prorated costs related to the home. The seller may have paid homeowner’s insurance and taxes ahead of time and will get a credit on the closing statement for the period covered after the closing date.

Be alert for fees that are bundled. You should ask for an itemized list of these fees. Even though the GFE is a declared estimate, the estimate should not be too far from the final. To make sure, request a copy of the final settlement form the day before the closing so you can look it over once again.

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