What Is the Good Faith Estimate and How Does It Work?
Navigate financial transparency. Learn how the Good Faith Estimate provides upfront cost clarity and protects you from bill surprises.
A Good Faith Estimate (GFE) provides consumers with an upfront estimate of costs for a service or transaction. Its primary purpose is to foster transparency and prevent unexpected charges, empowering individuals to make informed financial decisions.
The Good Faith Estimate Concept
The Good Faith Estimate represents a projection of expenses based on the best available information. Service providers offer this transparent disclosure of anticipated charges before services are rendered or transactions are finalized. The “good faith” aspect implies the estimate is honest and reasonable, reflecting typical costs. It is not a final bill but a tool for financial planning and comparison. The objective is to eliminate surprises by outlining expected fees, allowing consumers to compare offers.
Good Faith Estimates in Mortgage Transactions
Historically, the Good Faith Estimate played a significant role in mortgage lending under the Real Estate Settlement Procedures Act (RESPA). Lenders were required to provide a GFE to mortgage applicants within three business days of receiving a loan application. This document detailed estimated closing costs, including loan origination fees, appraisal fees, title insurance, and other settlement charges. The GFE aimed to help borrowers compare loan offers and understand the various expenses involved in a home purchase or refinance.
However, for most residential mortgages, the GFE has been largely replaced. The TILA-RESPA Integrated Disclosure (TRID) rule, implemented in October 2015, integrated and streamlined mortgage disclosures. Under TRID, the GFE and the initial Truth-in-Lending disclosure were combined into the Loan Estimate (LE). The HUD-1 Settlement Statement was replaced by the Closing Disclosure (CD). While the LE and CD serve a similar purpose of cost transparency, the GFE is now primarily applicable only to reverse mortgages.
Good Faith Estimates in Healthcare Services
In healthcare, Good Faith Estimates gained prominence with the No Surprises Act, effective January 1, 2022. This legislation aims to protect patients from unexpected medical bills. Healthcare providers and facilities must now provide a GFE to uninsured or self-pay patients.
The healthcare GFE outlines expected charges for scheduled services, covering costs for medical tests, procedures, prescription drugs, equipment, and facility fees. It must be provided within specific timeframes:
- Within three business days of a request.
- Within three business days of scheduling if a service is scheduled at least 10 business days in advance.
- Within one business day of scheduling for services scheduled 3 to 9 business days in advance.
This estimate includes charges from the primary provider and any co-providers or co-facilities.
Reviewing Your Good Faith Estimate
Upon receiving a Good Faith Estimate, whether for a financial transaction or healthcare service, review it thoroughly. Compare estimated costs against any prior discussions or expectations. Pay close attention to the itemized breakdown of services and associated charges, ensuring all anticipated elements are included. Note any disclaimers, as these clarify that the GFE is an estimate and actual costs may vary due to unforeseen circumstances.
Ask clarifying questions about any listed item or fee that seems unclear or unexpected. Understanding the scope of services and any potential for additional costs is important. Keep a copy of your GFE for your records, as it serves as a reference point. If a final bill significantly exceeds the GFE, particularly by $400 or more in healthcare, you may have the right to dispute the charges. In such cases, contacting the provider or facility’s billing department is the initial step, and if unresolved, further action may involve a patient-provider dispute resolution process.