Loan Estimate (LE) and Good Faith Estimate (GFE)

Updated 2026-05-18

The Loan Estimate (LE) and Good Faith Estimate (GFE) are disclosure forms designed to provide prospective mortgage borrowers with clear, understandable estimates of loan terms and costs. While both serve the purpose of enabling consumers to comparison shop and make informed decisions, the LE largely replaced the GFE for most transactions with the implementation of the TILA-RESPA Integrated Disclosure (TRID) Rule.

Historical Context and Current Use

Good Faith Estimate (GFE)

The Good Faith Estimate (GFE) was a disclosure form historically required under the Real Estate Settlement Procedures Act (RESPA) of 1974 (RESPA) and Regulation X (12 CFR Part 1024), specifically addressed in 12 CFR § 1024.7 Good Faith Estimate and Appendix C to Part 1024. Its primary purpose was to provide a clear, understandable, and transparent estimate of the costs a borrower would incur at settlement for a mortgage loan.

Historically, under RESPA, GFEs were a standard requirement for all mortgage applications. However, effective October 3, 2015, with the implementation of the 2018 TILA RESPA Rule (TRID) Rule, the GFE was largely replaced by the Loan Estimate for most closed-end consumer credit transactions secured by real property.

Consequently, the GFE is now almost exclusively used for reverse mortgage applications. While the GFE is no longer in active use for new applications other than reverse mortgages, understanding its principles and the types of costs it disclosed is important for historical context and for certain legacy loans or specific exam questions that may reference pre-TRID disclosures.

Loan Estimate (LE)

The Loan Estimate (LE) is a three-page disclosure document provided by lenders to prospective mortgage borrowers. It replaced the Good Faith Estimate (GFE) and the initial Truth-in-Lending Disclosure for most mortgage transactions.

The LE is required under the 2018 TILA RESPA Rule (TRID) rule, which integrates disclosure requirements under the Truth in Lending Act (TILA) and Regulation Z (TILA) and the Real Estate Settlement Procedures Act (RESPA) (RESPA).

Purpose and Key Components

Both the GFE and LE aim to help consumers compare loan offers and understand the costs associated with their mortgage.

GFE Key Components

A GFE typically includes:

• Loan Summary: An overview of the loan, including the loan amount, term, and interest rate.
• Estimated Monthly Payment: The projected monthly payment for the loan.
• Estimated Closing Costs: A detailed breakdown of anticipated fees and charges, categorized into sections with varying tolerance levels. These include:
  • Origination charges
  • Appraisal and credit report fees
  • Title insurance and settlement services
  • Government recording charges and transfer taxes
• Important Dates: Key dates, such as the interest rate lock expiration.

LE Key Components

The LE includes critical information such as:

• Loan Terms:
  • Estimated interest rate
  • Loan term and loan amount
  • Whether the loan has a Closing Costs or an Adjustable-Rate Mortgage (ARM) (ARM), including how interest rates and payments could change in the future for ARMs
  • Annual Percentage Rate (APR) (APR) and Truth in Lending Act (TILA) and Regulation Z (TIP)
• Projected Payments:
  • Projected monthly mortgage payment
  • Estimated tax and insurance costs
  • A breakdown of estimated monthly payments, including principal & interest, mortgage insurance, and estimated escrow amounts.
  • Total principal and interest paid in five years
• Costs at Closing:
  • Expected closing costs
  • A summary of estimated closing costs, including loan costs and other costs.
  • The estimated amount of cash the consumer will need to bring to closing.
• Comparisons: A section comparing the total interest percentage (TIP), principal paid, and total payments over 5 years.
• Other Considerations: Information on appraisal, assumption, homeowner's insurance, late payment fees, refinancing, and loan servicing.
• Confirmation: Confirmation of receipt via applicant signatures.

The first page of the LE prominently displays the title "Loan Estimate" and a reminder to "Save this Loan Estimate to compare with your HUD-1 Settlement Statement, Special Information Booklet, Closing Disclosure, and Form HUD-11702". It also includes the name and address of the Creditor (Lender) (or Mortgage Loan Originator (MLO) if the creditor is unknown) and the date issued.

Key Requirements and Timing

Loan Estimate (LE) Timing and Delivery

Mortgage Loan Originator (MLO)s (MLOs) and lenders must adhere to specific rules when issuing and delivering the LE:

• Timing: The LE must be provided to the Borrower (Consumer) no later than three business days after receiving a Complete Loan Application Definition. A "business day" for this purpose is any day on which the creditor's offices are open to the public for carrying on substantially all of its business functions.
• Delivery Method: The LE can be delivered by hand or placed in the mail.
• No Application Fees: Lenders are prohibited from charging any fees before providing the LE, with the sole exception of a reasonable fee to run a credit report.
• Record Keeping: Lenders are required to keep a copy of the LE for three years after the loan is signed.

The three-business-day delivery window is triggered by the receipt of a complete application, but the ultimate point of no return for certain changes is tied to Complete Loan Application Definition. The precise moment of consummation, which is when the borrower becomes contractually obligated to the creditor, is determined by applicable state law. This state-law definition of consummation is crucial for understanding when revised Loan Estimates can be issued due to a Changed Circumstance or Other Triggering Event (TILA-RESPA).

Accuracy and Tolerance Levels

To protect consumers from unexpected increases in loan costs, both the GFE and LE are subject to specific tolerance levels that dictate how much actual closing costs can differ from the estimated amounts.

GFE Tolerance Levels

GFE tolerance levels are divided into three categories, as outlined in 12 CFR § 1024.7:

1. Zero Tolerance: Charges that cannot increase at all from the amount listed on the GFE. Examples include the origination charge, transfer taxes, and the credit or charge for the interest rate (while locked).
2. 10% Cumulative Tolerance: The sum of these charges cannot increase by more than 10% from the sum of the amounts listed on the GFE. Examples include lender-required settlement services (where the lender chooses the provider), lender-required title services and insurance (when using a lender-identified provider), and government recording charges.
3. Unlimited Tolerance: Charges that can change without any limit. Examples include prepaid interest, property insurance premiums, and amounts placed in an escrow account.

If any charges at settlement exceed the permitted tolerances, the loan originator may be required to cure the violation, often by reimbursing the borrower for the excess amount.

LE Tolerance Levels

The Loan Estimate must be provided in good faith, meaning the actual charges at closing cannot exceed the estimated charges beyond specified Tolerances (Loan Costs). Certain fees on the LE are subject to Tolerances (Loan Costs) and may change, but some fees are not allowed to change at all. If these non-changing fees do increase, the lender must cover the difference.

Binding Nature and Revisions

GFE Binding Nature and Permissible Changes

A lender is bound by the GFE, within the established tolerances, unless a revised GFE is issued due to specific "changed circumstances". These include:

• Changed circumstances affecting settlement costs (e.g., an unexpected event increasing service costs).
• Changed circumstances affecting the borrower's eligibility (e.g., new information impacting creditworthiness or property value).
• Borrower-requested changes to loan terms or settlement services.
• Expiration of the GFE (if the borrower does not express intent to proceed within 10 business days).
• Changes in interest rate-dependent charges if the interest rate was not locked.

In the event of a legitimate changed circumstance, the lender must provide a revised GFE within three business days of receiving the new information.

LE Binding Nature and Revisions

Receiving an LE does not guarantee loan approval or lock the borrower into a specific loan. The LE is generally only binding on the date it's issued. Lenders are legally required to honor the interest rate and terms quoted if the borrower takes steps to accept the loan and Interest Rate Lock on that specific day. Because Adjustable-Rate Mortgage (ARM) can change daily, there's no guarantee the same rate will be available if the borrower doesn't lock it in on the issue date.

A Creditor (Lender) can issue a revised LE if there is a Changed Circumstance or Other Triggering Event (TILA-RESPA) after the initial LE has been provided. A revised Loan Estimate may be issued only under specific Changed Circumstance or Other Triggering Event (TILA-RESPA) or other triggering events, and generally must be provided at least four business days prior to consummation. Common scenarios leading to a revised LE include:

• A change in loan programs
• A decision to make a lower Down Payment and Closing Cost Assistance
• An The Appraisal Foundation value significantly different from the initial estimate
• A drop in the borrower's VA-Approved Credit Underwriter and Underwriting Standards
• Inability to document income initially included in the application

Specific Disclosures for Loan Features (LE)

The "Does the loan have these features?" section of the Loan Estimate requires specific disclosures for certain loan characteristics:

• Adjustable Rate Mortgage (ARM): If the loan is an ARM, this section will indicate "YES" and provide details on how the interest rate and payments may change.
• Balloon Payment: If the loan includes a balloon payment, "YES" must be disclosed. The maximum amount of the balloon payment and its due date must be explicitly stated (e.g., "$149,263 at the end of year 7"). This is detailed in the Loan Estimate – Balloon Payment Sample (H-24E) model form and mandated by 12 CFR § 1026.37(b)(5) and § 1026.37(b)(7)(ii) of Truth in Lending Act (TILA) and Regulation Z.
• Prepayment Penalty: If the loan has a prepayment penalty, "YES" must be disclosed, along with the maximum amount and when it can be imposed.

Relationship to Other Disclosures

• HUD-1 Settlement Statement, Special Information Booklet, Closing Disclosure, and Form HUD-11702: The LE is designed to be compared with the HUD-1 Settlement Statement, Special Information Booklet, Closing Disclosure, and Form HUD-11702, which the Borrower (Consumer) must receive at least three business days before consummation of the loan.
• TRID Rule: The LE is a core component of the 2018 TILA RESPA Rule, which integrates disclosure requirements under the Truth in Lending Act (TILA) and Regulation Z (TILA) and the Real Estate Settlement Procedures Act (RESPA) (RESPA).

Regulatory Citations

The requirements for the Loan Estimate are primarily found in Truth in Lending Act (TILA) and Regulation Z (12 CFR Part 1026), specifically:

• 12 CFR § 1026.19(e) (Reg Z) (Loan Estimate requirements)
• 12 CFR § 1026.37 (Loan Estimate content)
• 12 CFR § 1026.37(b)(5)
• 12 CFR § 1026.37(b)(7)(ii)
• 12 U.S.C. § 2604 (RESPA)