Recent guidelines from Washington have forced a change to the way that loan originators will disclose closing costs for all homebuyers. The purpose of the new Good Faith Estimate is to level the playing field for borrowers comparing loans to be able to make apples to apples comparisons for loan scenarios.
In essence, HUD is working to bring all lenders up to the same standard of excellence in reporting closing costs that they have always adhered to, estimating realistic fees that a buyer should expect to pay at closing with no last minute surprises.
What are the important facts you should be aware of in having conversations with homebuyers? Below are some important points to know:
1. All fees paid to the lender/broker are to be consolidated in one line, including processing fees, origination fees, etc. These charges cannot change from the original estimate without a material change to the loan requested.
2. In the event fees are being charged to obtain a lower rate, these are to be broken out and itemized for the borrower's ease of comparison to other loan programs.
3. Estimates for fees from government recording charges and third party settlement providers suggested are to be itemized and the lender is held to a tolerance of 10% for their accuracy. In the event the estimated charges exceed the amount listed by the allowable tolerance, the lender will be responsible for making up the difference.
4. Estimates for services that the buyer can shop for and do choose can change at settlement without the lender being held accountable. This can include title charges, homeowner's insurance, and initial deposits for an escrow account.
As always, I will strive to explain to you with an accurate estimate of closing costs and funds to close.
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