What is a 'good faith estimate' used for in the mortgage process?

A 'good faith estimate' serves as an important tool in the mortgage process by providing a detailed estimate of the expected costs and fees associated with a mortgage loan. This document helps potential borrowers understand the various charges they will incur during the loan process, including origination fees, title insurance, and other closing costs. By presenting this information upfront, the good faith estimate allows borrowers to better plan their finances and compare different loan offers, ensuring they have a clearer understanding of what to expect throughout the transaction.

While other options may be relevant to the overall process, they do not specifically align with the purpose of a good faith estimate. For example, assessing property value is typically conducted through an appraisal, and a summary of the borrower’s credit history would involve reviewing credit reports. A formal loan approval notification, meanwhile, would communicate the lender's decision regarding the loan application rather than providing an estimate of costs. Thus, the focus of the good faith estimate on outlining financial expectations makes it a critical component in the mortgage journey.