By Since the dawn of time (or at least since financial institutions have been issuing mortgages to consumers), a shroud of confusion has lain over the process. Questionable fees, questions that don’t really have concrete answers, “best guesses”, and a morass of paperwork have been the norm in a business that ought to have been crystal clear.
As of January 1, 2010, much of that changed.
Under the Real Estate Settlement Procedures Act (RESPA), HUD has instituted rules and regulations that require all lenders to use standardized, simple-to-understand good-faith estimate forms. In addition, closing agents are now required to use settlement statements that show — in black and white — any differences between original estimates and actual costs.
I say that it’s about time.
One of the major problems leading to the mortgage crisis that began in late 2007 and which continues today was the fact that many borrowers didn’t fully understand the terms of a mortgage. Now with standardized good-faith estimate forms, which are easy to understand, are being used with all lenders and allow people to compare loans and legitimately shop around for the best deal.
When you ask, “How much does this loan cost?” someone should be able to answer the question. It’s a question to which there should be a concrete answer. Now, most fees cannot increase from the time of the original estimate. Those that can cannot, increase more than 10%. Any increases over and above these levels will have to be covered by the lender. No ifs, ands or buts.
The new forms don’t fix everything, of course.
One thing that the new good-faith estimate does not show consumers is what their monthly payments will be under the terms of a mortgage, nor the funds that they need to bring with them to settlement. It is imperative that buyers have this information, so that they can effectively prepare for what lies ahead.
If you’re thinking of shopping for a mortgage this year — and there are certainly many, many reasons to do so — be sure to talk to your Intero Mortgage lender, your tax advisor or your Intero agent, so that any and all questions you may have are answered before you get to the settlement table. The good-faith estimate forms may have made it easier to compare mortgages, yet within our economy the lending criteria has become more strict and harder to decipher. Now it’s more important than ever, to not only choose a competitive lender, but choose the lender you have the utmost confidence and trust in.
Be informed yet be well guided.
