What is the purpose of a good faith estimate in mortgage lending?

A good faith estimate serves the primary function of providing borrowers with a clear breakdown of the estimated closing costs associated with obtaining a mortgage. This document outlines various fees and costs, such as origination charges, points, appraisal fees, and title insurance, which the borrower can expect to encounter during the loan process. By presenting this information upfront, the good faith estimate helps borrowers plan their finances and compare mortgage offers from different lenders. It fosters transparency in the lending process and enables borrowers to make informed decisions without unexpected surprises at closing.

While other options refer to important aspects of the mortgage process, they do not align with the specific role of a good faith estimate. For instance, a comprehensive list of loan offers would not be the purpose of this estimate; instead, it focuses on costs. The appraisal value and the borrower's credit history are also critical to the loan approval process, but they fall outside the scope of what the good faith estimate covers. Overall, the purpose of this estimate is to provide a transparent financial picture to the borrower regarding closing costs.