Good Faith Estimate: What You Need to Know About Closing Costs

Buying a home—especially as a first-time buyer—can feel overwhelming. Between the paperwork, the loan process, and the expenses, it’s easy to feel unprepared for the costs involved.

Unless you’re paying all cash, you’re already planning for a monthly mortgage payment. What often surprises buyers are the additional fees due at closing, known as closing costs or settlement costs. These are the charges you must pay before you receive the keys to your new home.

Here’s the good news: you don’t have to wait until closing day to find out what these fees are. Thanks to federal law, your lender must provide a Good Faith Estimate (GFE)—a breakdown of your estimated closing costs—within three business days of your mortgage application. If mailed, this requirement is still considered met within that timeframe.

What’s Included in a Good Faith Estimate?

Closing costs are generally divided into two main categories:

1) Origination Fees

Fees charged by your lender for processing and preparing your loan.

• Application fee
• Underwriting fee
• Processing fee
• Discount points
• Rate lock fee
• Credit report fee
• Wire transfer fee
• Mortgage broker fee
• Origination fee

2) Settlement / Closing / Escrow Fees

Third-party charges and other required costs to finalize your purchase.

• Property appraisal
• Lender inspection (if applicable)
• Title search/title examination
• Title insurance
• Attorney fee (where applicable)
• Abstract or title search
• Transfer tax
• Survey
• Pest inspection
• Condominium application fee (for condos)
• Recording fees
• Government entity tax stamps
• Document preparation fee
• Prepaid hazard insurance
• Prepaid interest, property taxes, mortgage insurance, flood insurance (where applicable)
• Notary fee

Which Fees Are Negotiable?

Some costs are non-negotiable—such as government taxes, transfer fees, and recording charges. Others are not set in stone. Lender-controlled fees like origination, underwriting, or application fees can vary and are often negotiable.

Third-party fees (e.g., appraisal, title services, notary) are typically consistent across lenders because they’re passed directly to you without markup.

Be cautious of vague “junk fees” that some lenders add. Don’t hesitate to question them; many can be reduced or removed.

Why Compare Estimates?

Closing costs typically run 3%–5% of your home’s purchase price. That can add up quickly, so it pays to shop around. Get Good Faith Estimates from at least three lenders, compare line items, spot discrepancies, and negotiate where possible.

Bottom Line

A Good Faith Estimate helps you understand and plan for your closing costs. Remember: many fees are negotiable, so asking questions and comparing lenders can save you money before you even get the keys.