The New Year is here, you are ready to purchase a new home, what’s new?? The biggest and most significant industry change in years, maybe even decades, has come from the US Department of Housing and Urban Development (HUD). HUD has revised the Good Faith Estimate (GFE) and the HUD-1 Settlement Statement to try and make it simpler and easier for the consumer to make responsible and informed decisions before purchasing a home.
As a consumer, most of the changes and revised forms have been made with your best interests in mind. HUD has tried to prepare a simpler more direct way to help you understand your options and fees up front so that you have as much information as early as possible to be able to make the best decision for you and your family. The new rules and forms have been put in place to help provide a loan shopping tool that accurately discloses terms and fees, and prevents last minute changes to either at closing.
In anticipation of the new rules, HUD has released a publication to help guide you, the consumer, through the loan decision process: Shopping For Your Home Loan: HUD’s Settlement Cost Booklet. Real Estate Settlement Procedures Act (RESPA) requires that loan originators provide consumers with the booklet within three days of a loan application. This booklet, albeit lengthy, provides a basic overview of the home buying and mortgage lending process. It also explains in detail each part of the new GFE and the new HUD-1 Settlement Statement.
The intention of the new GFE is to encourage consumers to shop and compare fees from various lenders before choosing a mortgage. It shows what services are lender chosen (and thus cannot change), and also what services the consumer can go out and shop for. It clearly states important dates, loan terms, and settlement charges should you decide to move forward with the loan.
The new HUD-1 Settlement Statement then allows borrowers to easily compare those quoted fees to their final costs before closing on a loan. A new page has also been added to the HUD-1 Settlement Statement that contains a chart which shows the actual fees charged compared to those fees that were listed on the GFE. The chart identifies charges that should not have increased at all compared to the GFE, those that should not have increased by more than 10% compared to the GFE, and those that can fluctuate.
- Origination charge: cannot increase.
- Transfer taxes: cannot increase.
- Appraisal fees: can only increase up to 10%.
- Government recording fees: can only increase up to 10%.
- Title insurance: can only increase up to 10% if borrower uses the title insurer selected by the lender
It also shows whether the consumer’s monthly payment will increase and, if so, when. This gives the borrower a very clear picture of what the closing expenses will be compared to what was shown on the GFE, so he or she can note any discrepancies and ask about them up front and prior to closing –preventing surprise fees and delays at the time of signing.
With these new tools now available and with a clearer disclosure of fees and terms, hopefully consumers will be able to make informed and responsible decisions that will help them and their families achieve financial success and home ownership.
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