Florida Broker Practice Exam

Which RESPA disclosure must be given at loan application or within three business days?

1. Credit Score Disclosure

2. Good Faith Estimate (GFE)

3. Truth in Lending Disclosure

4. Loan Estimate Document

The correct answer is: Good Faith Estimate (GFE)

The Good Faith Estimate (GFE) is a disclosure required by the Real Estate Settlement Procedures Act (RESPA) that must be provided to borrowers at the time of loan application or within three business days thereafter. The purpose of the GFE is to give borrowers an estimate of the closing costs they will incur when taking out a mortgage. This estimate includes various fees and charges associated with the real estate transaction, allowing borrowers to understand the financial implications of their loan. The GFE helps borrowers compare different loan offers by standardizing the presentation of settlement charges, making it easier to assess which lender provides better terms. This transparency is a fundamental objective of RESPA, aiming to protect consumers from hidden fees and ensure they have the necessary information to make informed decisions. In contrast, the other options listed serve different purposes and have different timelines for distribution. While the Credit Score Disclosure is important, it is not specifically linked to the loan application timeframe in the same way as the GFE. The Truth in Lending Disclosure and the Loan Estimate Document, although significant in the lending process, have different requirements and timelines under the regulations governing mortgage disclosures.