Whether you are buying a home or are refinancing your current mortgage, you eventually have to apply for a loan and compare offers. You will need to gather a lot of paperwork, satisfy a list of credit requirements, negotiate the best possible loan terms and make sense of the good faith estimate.

You will be asked to supply a lot of paperwork when you apply. Then you'll get some paperwork in return. Of the documents you receive, the most important is the good faith estimate of closing costs. The lender might shorten that to "good faith estimate" or GFE. Here we will call it the good faith estimate.

Before we dive into a detailed explanation of the good faith estimate, we will tell you about the difference between prequalification and preapproval, the questions that lenders will ask, and the questions that you should ask lenders. Near the end of this chapter we will describe what you will find in the good faith estimate. That won't be the final word, though. The good faith estimate contains several categories of fees, and it will take this and the following two chapters to explain them all.