What does a "good faith estimate" provide to borrowers?

A "good faith estimate" is a critical document provided to borrowers that outlines an early estimate of the costs and settlement fees associated with a mortgage loan. This estimate is intended to give borrowers a clear understanding of the financial obligations they can expect at closing, including items like loan origination fees, title insurance, and other related expenses.

The purpose of this estimate is to help borrowers make informed decisions during the mortgage process, allowing them to compare offers from different lenders and assess the overall affordability of the loan. This early disclosure can aid in budgeting and understanding the financial impact of their mortgage, which is essential for effective financial planning.

Other options may provide valuable information about the loan or its implications, but they do not serve the specific function of detailing estimated settlement costs and fees that the good faith estimate addresses. For instance, providing a final breakdown of loan costs would occur after the loan process has proceeded further, and descriptions of loan repayment options or tax implications delve into different aspects of borrowing rather than focusing on upfront, estimated costs.