What defines a good faith estimate?

A good faith estimate is defined as an approximation of various charges associated with obtaining a loan. This document provides borrowers with a breakdown of estimated costs that they will incur when obtaining a mortgage. It typically includes important information such as the loan amount, interest rate, and an itemized list of estimated closing costs. This allows borrowers to have an understanding of what to expect financially as they move through the loan process, enabling them to make informed decisions.

The purpose of this estimate is to ensure that lenders act in good faith by providing borrowers with information that helps compare loan offers and understand potential expenses involved. A good faith estimate is crucial for transparency in the lending process, ensuring borrowers are not caught off guard by unexpected costs.