What constitutes a “good faith estimate”?

A “good faith estimate” is a document provided by lenders that outlines the estimated costs associated with obtaining a mortgage. This estimate includes various fees that the borrower is likely to incur during the closing of the loan, such as origination fees, appraisal fees, and other closing costs. The purpose of the good faith estimate is to provide transparency to borrowers, allowing them to understand the financial obligations they are taking on before committing to the mortgage.

By providing these estimates early in the process, borrowers can make informed decisions and compare offers from different lenders. This document is required under the Real Estate Settlement Procedures Act (RESPA) and aims to protect consumers from experiencing unexpected costs at closing. Understanding the good faith estimate is crucial for any prospective homeowner, as it plays a key role in budgeting for a new home purchase.

The other choices do not accurately reflect the purpose and definition of a good faith estimate. For instance, actual costs after closing are not estimates, while a list of properties available for purchase pertains more to real estate listings than financing. An agreement on pricing between the buyer and seller relates to the transaction itself rather than the loan process.