Question

lender estimates the closing costs on a home loan will be 3% of the loan amount of $180,000. The actual closing costs are listed below.
Closing Cost
Charge
Loan origination
$345
Title insurance
$600
Attorney's fees
$1,350
Appraisal
$480
Inspection
$550
Recording fees
$175
Escrow
$1,900

Evaluate the lender's good faith estimate.
a.
The lender made an excellent estimate; it was equal to the actual closing costs.
b.
The lender made a very good estimate; it was within 0.25% of the actual closing costs.
c.
The lender made a fairly good estimate; it was between 0.25% and 0.5% of the actual closing costs.
d.
The lender made a poor estimate; it was higher than 0.5% of the actual closing costs.

Answer 1

a. The lender made an excellent estimate; it was equal to the actual closing costs.

Work: 3% of $180,000 = $5,400. Sum of listed charges = $345+$600+$1,350+$480+$550+$175+$1,900 = $5,400, so the estimate matches exactly (0% difference).