If you are a person over sixty-two years of age and are looking to put your house on mortgage, you are likely to get a good faith estimate from the lender. An estimate now replaced with a loan estimate for most types of a mortgage loan is now only limited to the case of a senior person looking for a reverse mortgage loan.
Good faith estimate covers the outline of the entire cost and terms of the reverse mortgage loan. It enables the borrowers to make comparisons between the estimates provided by various lenders and choose the one that is suitable to their needs. The lenders must present their good faith estimate within three days from the application of the borrower. The estimate provided in a GFE must not vary from the actual expense by more than 10% in case of third-party fees and charges.
It is for a reverse mortgage loan, that a Good Faith estimate has to be submitted by the prospective lenders. It is also required of them to structure the loan in such a manner so that the home amount does not exceed the value of the homeowner equity in the house. If for any reason in the future the loan value exceeds the value of the house, the owner does not need to pay for it as it is covered by the mortgage insurance covered with reverse mortgage loans.
Some of the important fees and charges included in a good faith estimate are loan fees, advance fees, title charges, reserves, government charges as per the respective regulations and any additional charges if and as levied.
To better understand Good Faith Estimate, one must also understand what reverse mortgage is as they both go hand in hand. Some of the key features of a Reverse mortgage are:
● Simply put it is a loan available for a homeowner over sixty-two years of age, who wishes to raise a loan against his equity in the house.
● They can choose to receive the loan amount in a lump sum, monthly instalments or as a line of credit.
● Unlike a forward mortgage loan, which is used while buying a house, the homeowner does not need to repay the loan.
● The entire balance, up to a limit, is made when the owner either dies, moves out of the house or resells it.
