HUD Real Estate Disclosure Act
Effective January 1, 2010, the U.S. Department of Housing and Urban Development (HUD) amended the Real Estate Settlement Procedures Act (RESPA) to make it easier for consumers buying one- to four-unit residential properties to do comparison shopping.
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Changes to Good Faith Estimate
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The Good Faith Estimate discloses the costs and terms associated with obtaining a mortgage loan. By law, a borrower should receive a Good Faith Estimate within three business days of completing a loan application. Thereafter, a borrower has seven business days to shop around for a better loan. Once the grace period ends, the loan can be consummated.
Summarize and Itemize
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The first page of the Good Faith Estimate summarizes the loan terms, loan origination charges, and settlement charges. The second page of the Good Faith Estimate itemizes the costs and terms including loan amount, interest rate, monthly payment, late fees, prepayment penalties, balloon payment, mortgage broker commissions, processing fees, title insurance, and escrow fees.
Comparison Shopping
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The third page of the Good Faith Estimate offers a comparative loan analysis of the loan being offered and two additional loan scenarios: one with lower settlement costs and higher monthly payments and another with lower monthly payments and higher settlement costs.
HUD-1
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The HUD-1 lists the actual costs of the loan. Charges between the Good Faith Estimate and the HUD-1 may differ if the borrower chooses different providers for settlement services than those recommended on the Good Faith Estimate. For example, a borrower may purchase homeowner's insurance with their current provider instead of the provider listed on the Good Faith Estimate.
What Fees Can Change and By How Much
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Between the time of the Good Faith Estimate and the HUD-1, some costs can change by 10 percent. These costs include the following: required services selected by the lender or borrower, title costs including lender's and owner's title insurance, and government recording fees. Costs that remain fixed include the loan origination fee, points and fees after locking an interest rate, and transfer taxes.
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Related Searches
References
- Photo Credit sign. loan sale image by L. Shat from Fotolia.com
