Good Faith Estimate (GFE)

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Good Faith Estimate (GFE)

Key takeaways

  • A Good Faith Estimate (GFE) is a written estimate of the expected fees, costs, and terms for a reverse mortgage.
  • Since October 2015, GFEs apply only to reverse mortgages; other mortgage types use loan estimate forms.
  • Lenders must provide a GFE within three business days of receiving a borrower’s application.
  • Costs on a GFE are estimates and can change before closing.
  • Borrowers can (and should) compare multiple estimates and watch for excessive or added fees.

What is a Good Faith Estimate?

A Good Faith Estimate (GFE) is a standardized document that outlines the approximate costs and key terms of a reverse mortgage offer. Its purpose is to help borrowers compare offers from different lenders and make informed decisions before committing to a loan.

Who it applies to

GFEs now only apply to reverse mortgages—home loans that let homeowners aged 62 and older convert home equity into a lump sum, fixed payments, or a line of credit. For most other mortgage types, lenders provide a loan estimate instead.

How it works

  • The lender must give a GFE within three business days after receiving a reverse mortgage application.
  • The form uses plain language and breaks down expected charges so borrowers can compare lenders.
  • Borrowers may obtain multiple GFEs to shop for better terms or lower costs.
  • Lenders may collect a credit report fee before issuing the GFE, but cannot charge additional fees just to provide the estimate.

What the GFE includes

Typical items shown on a GFE:
* Loan amount and basic terms (type of disbursement, repayment policies)
* Estimated closing costs (title, taxes, recording fees)
* Administrative and third-party fees
* Estimates for taxes and insurance
* Notes on how interest rate and payments could change (if applicable)

Limitations and reasons estimates change

  • A GFE provides approximate costs. Final closing costs may be higher or lower.
  • Some closing costs come from third-party providers; the lender may not know exact amounts when issuing the GFE.
  • Changes to loan terms, required services, or errors in initial information can create differences between the estimate and final figures.

GFE vs. Loan Estimate

  • GFEs: currently limited to reverse mortgages.
  • Loan estimates: replaced GFEs for most other mortgage transactions and must also be provided within three business days of application.
    Both documents serve the same core purpose: presenting comparable, standardized estimates of loan costs and terms.

Special considerations and exceptions

  • Borrowers applying for HELOCs, certain manufactured housing loans not secured by real estate, or some homebuyer assistance programs typically receive truth-in-lending disclosures instead of a GFE or loan estimate.
  • Be alert to lenders who add excessive administrative fees (e.g., inflated wire-transfer charges). Compare itemized fees across offers.

Practical tips for borrowers

  • Request and compare GFEs or loan estimates from several lenders before deciding.
  • Review each line item and ask for explanations of any unfamiliar or high fees.
  • Confirm which charges are estimates and which are fixed.
  • Keep records of all estimates and communications with lenders.

Conclusion

A Good Faith Estimate is a tool designed to increase transparency for reverse mortgage borrowers by summarizing expected costs and terms early in the application process. Use GFEs to shop, compare, and ask questions so you understand potential costs before committing to a loan.