9.3. How Much Will You Pay?

Even setting aside 3 to 6 percent of the loan amount for closing costs you might worry whether you'll have enough cash at the closing. Fear not. When you apply for a loan, federal law requires that, within three days, your lender give you a written estimate of those costs. To do this, the lender uses a form called the Good Faith Estimate (GFE), developed by the Department of Housing and Urban Development (HUD) for just this purpose. This recently revised, three-page document helps you compare loans from the same or different lenders and understand the total closing costs you'll pay. Chapter 8 goes through a GFE section by section. Here, you get an overview of how the GFE estimates your closing costs.

The Good Faith Estimate isn't just the lender's best guess at your closing costs—it's a realistic estimate that comes surprisingly close to the true figures. That's because federal regulations dictate the degree to which closing costs can increase. For example, the following costs cannot be higher at the closing than they are on your GFE: