The Real Estate Settlement Procedures Act (RESPA) created the good faith estimate (GFE) to inform borrowers of an estimated final rate and costs they'll pay when they close on their house. You should get it within three business days of applying for a loan.

The word estimate is very important here. The GFE is not a final guarantee of what you'll pay for that loan. Most people do not study their GFE well enough (or even look it over) to compare it to their final costs and rate at closing; they just sign, sign, sign, and often end up paying more than they intended to.

And guess what? This is not illegal. The government allows the final APR number to be one-eighth of a percentage point up or down on fixedrate loans and a quarter of a point for variable-rate loans, which is why they call it an estimate.

How can you avoid this? See if competing lenders might provide you GFEs before you apply so you can get a feel for how similar offers actu-ally end up charging different rates and costs. Also, when you are ready to apply, see if your chosen lender will guarantee its GFE. Lenders rarely do this, but even if they refuse, they need to know you're going to watch them like a hawk on fees.