What is a "good faith estimate" in real estate?

A "good faith estimate" in real estate refers specifically to the estimation of closing costs that a borrower can expect to incur during a mortgage transaction. This document is crucial because it provides the buyer with an idea of how much money they will need to bring to the closing table, including all associated fees such as loan origination fees, title insurance, appraisal costs, and other closing expenses.

By law, lenders are required to provide this estimate within three business days of receiving a loan application, helping consumers understand the financial implications of their mortgage before proceeding. This transparency is key in the lending process, ensuring that borrowers are well-informed and can make better decisions regarding their financial commitments.

In contrast, other choices address concepts that are not aligned with the definition of a good faith estimate. A guarantee of property value involves assurances regarding real estate pricing, while a summary of tax implications would pertain to the tax obligations tied to property ownership. An agreement to hold property describes a different aspect of real estate transactions concerning property reservations rather than financial estimates.