We here at ReMax Town and Country Realty want to help you make sense of the new Good Faith Estimate. Your lender is required by the federal Real Estate Settlement Procedures Act to provide you with a "Good Faith Estimate" of the fees due at closing within three days of applying for a loan. The GFE and the U.S. Department of Urban Development (HUD) settlement statement is now required as of January 1st. Under the new rules, lenders and mortgage brokers are required to give consumers the good faith estimate forms within three days of receiving the application for a loan.
These mortgage fees, also called settlement costs, cover every expense associated with your home loan:
inspections, title insurance, taxes and other charges. These new requirements can be rather confusing even though HUD has published information on how to understand them blny are struggling on how to fill out certain sections of the new forms. The complete new GFE form is available here.
The Shane T. White Team has compiled some highlights, and possible issues of the changing rules, to help our understand the regulatory details with filling out the forms.
The "Originator": The actual name of the company originating the actual loan should be placed there.
Property Address: The property address is important. There are different requirements if you don't have an actual property address. Obviously a refinance transaction will have an address right away but, if you are buying a home, you may or may not have an actual property address at the time the estimate is provided.
Important Dates: How long will the interest rate used on the GFE will be honored.
Line No. 2 - How long are the estimated COSTS valid? (Must be at least 10 days from the GFE date.)
Line No. 3 - How long is the RATE valid? If the interest rate was created using rate-sheet pricing based on a 30-day lock because the rate wasn't locked in at the time of disclosure then "30" would go in that field. If the rate was locked for 15 days at the time of disclosure then "15" should be placed there.
Line No. 4 - The lender will require you to lock your interest rate a set number of days BEFORE the scheduled closing, this is due to the time it takes to collect documents, get appraisals, then Underwrite and prepare your final documents.
Summary of Your Loan This section lists interest rates, penalties and payments. The information is based on MONTHLY payments so a Biweekly-payment schedule must be completed as if the loan had a 12-month annual payment cycle. Note that you cannot make changes to the form itself without risking deeming in invalid. See HUD's FAQs for more specifics.
The "Escrow Account" section must be checked if there are any monthly payments, (outside of the monthly amount owed shown in the "summary of your loan" section) that will be held in escrow for payments for property taxes and other property-related charges. If the monthly loan payment only includes payments related to principal, interest or mortgage insurance then check the "No" box.
The intent of the GFE is to give potential borrowers a better idea of what they are getting into when they agree to accept a loan from a particular bank. Most analysts of the housing crisis maintain that many people were locked into high cost loans in the past because they did not understand the terms. The new form already has critics of its own, but its intent is to create more educated borrowers.
We here at ReMax Town and Country Realty want to make sure you understand these new rules and will help you with any questions that you have. Feel free to contact Shane T. White and his Team to clear up any concerns that you have with the new Good Faith Estimate whether selling or purchasing a home.
If you've been waiting for the right opportunity to get into the market, now's the time. The tax credit is an important incentive that will help stabilize our local housing market, stimulate the economy, and create new jobs in central Texas. Call the Shane T. White Team at ReMax Town and Country Realty today to get started in buying your new home. We can even sell your existing home.
Next: Spelling Out the Fees in GFE's
