A new Good Faith Estimate enters into effect January 1, with the goal of simplifying loan origination and settlement costs and making it easier for consumers to comparison shop between lenders.
What’s a Good Faith Estimate?
A good faith estimate must be provided by a mortgage lender or broker to a customer, as required by the Real Estate Settlement Procedures Act (RESPA). The estimate must include an itemized list of fees and costs associated with your loan and must be provided within three business days of applying for a loan.
While this is a form that is provided prior to closing, it is useful to use this document to compare the actual fees to be paid at closing as detailed in the HUD-1 Settlement Statement.
What’s changing?
The new form is now three pages instead of one, and more clearly lays out the various costs associated with your mortgage loan as well as which ones can and cannot change before closing:
Charges that cannot increase at settlement
- Origination charges
- Your credit or charge (points) for the specific interest rate chosen (after you lock in your interest rate)
- Your adjusted origination charges (after you lock in your interest rate)
- Transfer taxes
Charges for which the total can increase no more than 10% at settlement
- Requires services that we select
- Title services and lender’s title insurance (if we select them or you use companies we identify)
- Owner’s title insurance (if you use companies we identify)
- Required services that you can shop for (if you use companies we identify)
- Government recording charges
Charges that can change at settlement
- Required services that you can shop for (if you do not use companies we identify)
- Title services and lender’s title insurance (if you do not use companies we identify)
- Owner’s title insurance (if you do not use companies we identify)
- Initial deposit for your escrow account
- Daily interest charges
- Homeowner’s insurance
What to do if you still have questions
You can get more information from the HUD site, or ask a question in SmartHippo Answers and get free replies to your question delivered right to your inbox!
(Image courtesy wooleyduck on flickr.)
