What is the definition of "Good Faith Estimate" in mortgage lending?

The definition of a "Good Faith Estimate" in mortgage lending is accurately described as a document that provides a borrower with an estimate of the closing costs associated with a mortgage loan. This estimate gives borrowers an understanding of the potential fees they may incur during the loan process, empowering them to make informed decisions about their borrowing options.

The Good Faith Estimate is essential because it outlines various costs, including loan origination fees, title insurance, appraisal fees, and other associated expenses, allowing borrowers to prepare financially for closing. The estimate must be provided to borrowers in a timely manner, typically within three business days after they submit their loan application, ensuring transparency in the lending process.

Other options, while related to the loan process, do not encapsulate the primary purpose of a Good Faith Estimate. Summaries of loan terms and conditions and fee schedules serve different roles in the mortgage process and do not focus specifically on providing estimates for closing costs in the same way. A legal agreement represents a formal contract and lacks the detail and fluidity associated with estimates prior to closing. Therefore, the choice that defines the Good Faith Estimate is the one that highlights its primary function of cost estimation for closing.