When you first call or meet with lenders for pricing etc. they give you what’s called a Good Faith Estimate showing their fees, interest rate, etc so you could decide which loan is best for you and compare lenders. Well…..this wasn’t always apples to apples…and some lenders would be sneaky in underestimating or hiding costs as junk fees…and buyers were often confused…and sometimes were at the closing table when the terms of the loan were finally disclosed, or were changed without their knowledge…and they were “stuck” getting a loan and paying fees they weren’t told about upfront…or backing out of the deal with their moving truck packed up and in front of their new house (yea right…can we say “got you by the #$%” lol)
Well..our folks in Washington (HUD) have updated the rules that lenders must follow when disclosing fees and finalyzing your loan. It also changes the paperwork buyers and sellers sign at closing. This legislation is called RESPA (Real Estate Settlement and Procedures Act). I ‘ve taken the big nuggets and put them below so you know what will make geting a loan and buying/selling a house this year MUCH different than it was in 2009.
New Good Faith Estimate (GFE)
- This is now used much more in the transaction and the HUD document at closing now even shows a comparison of actual costs vs the GFE costs.
- Loan Fees are Grouped as one Charge – All lender and mortgage broker origination points, processing fees and administrative fees, interest rate buy down fees, etc are now ONE amount called “Origination Charges”. These fees CANNOT change from when you get the GFE through time of closing. If they do, the lender must disclose a new GFE at least 3 days before closing. If brokers are getting additional income by charging you a higher interest rate…(called Yield Spread Premium)…this must be included in this amount. Key point though…this only applys to brokers, not banks…so even though a brokers GFE may be higher here….it’s avisable to look at the whole picture and loan terms insted of just choosing the GFE that has the lowest origination fees.
- Lenders Must Recommend Providers for Required Services – These costs can only increase 10% – Lenders must provide estimates of other closing costs from required services like title, appraisal, etc and they now must provide a list of reccomended providers for these services to the buyer. Bottom line….if these fees increase more than 10%….the lender has to pay the difference and if not…the GFE must be redisclosed and 3 days must pass before it can close (if the buyer still wants to move forward)
- All Other Fees are up to The Borrower and CAN CHANGE without liability to the lender – Services like Homeowners insurance, Inspections, etc CAN change and these are still up to the borrower to choose providers for.
NOTE: These terms are only required and enforceable if the applicant does a full loan application w/required documentation and also provides at property address they want to purchase and a closing date. Until then….everything can still change.
MOST IMPORTANT : It’s more important now than ever that you work with a trusted and reputable mortgage professional. Times have changed and the days of Bubba doing your loan from his basement are over! This is only a brief overview. If you need a trusted referral to a top mortgage professional that I trust please let me know.
Mike 303-669-2744
The information above should not be relied upon in any way and you should meet with a licensed Colorado Mortgage Broker to get specific information about getting a loan. I’m not an attorney, lender, accountant,, etc. Sorry…but the US is so litigation happy now that I have to do the obligatory CYA 😉
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