The bottom half of page 1 of the Good Faith Estimate (GFE) form begins with a Summary of your Loan Section. This is where a lot of disclosures regarding the loan will be made.
- What is the initial loan amount?
- What is the initial interest rate?
- What will your initial monthly payment be? (Principal and Interest, and any mortgage insurance if applicable. Taxes and homeowner's insurance are not included here, but may be required to be paid as part of your monthly payment.)
- Can your interest rate rise? If so, how much?
- Can your loan balance rise? If so, how much?
- Can your monthly payment rise? (Principal and Interest, and any mortgage insurance. Taxes and homeowner's insurance excluded.) If so, how high could it go?
- Does your loan have a pre-payment penalty? If so, how high could that be?
- Does the loan have a balloon payment? If so, how much and when is it due?
Some lenders require an escrow account. This section will disclose if an escrow account is required or not and reiterate your base monthly payment amount. Remember that if an escrow account is not required, you will be responsible to keep current all taxes, insurance and other property related charges. Even when one is not required, some borrowers choose to have one set up anyway.
In the event that an escrow account is not required, some lenders may offer an incentive to establish an escrow account anyway. Others may actually assess a penalty or fee in the event you choose not to establish an escrow account, even if not required by the terms of the loan. This penalty will appear as part of the total origination charge and/or will be reflected in the interest rate you are quoted and is said to help cover the costs of monitoring that the taxes and insurance on the property are being kept current by the borrower.
Finally, at the bottom you will see a summary of all Estimated Settlement Charges. These are broken down into 2 sections: Adjusted Origination Charges (All LOAN Costs) and Charges for All Other Settlement Services (All other Costs to close). Both are broken down on the next page of the Good Faith Estimate (GFE) which we'll examine next.