Uncle Sam is trying to make mortgage shopping easier for novice buyers. Over the past couple of decades, financing a home has become a complex maze of numbers and requirements. Federal rules have now come into effect that require lenders to provide a standard form that list all of their fees under one quote in an easy to read format.
This is another attempt by the government to stave off future foreclosures. One area that contributed to the housing market crash was the amount of loans that defaulted because the buyer was not completely aware of all of the conditions and fees that their loan carried.
This revamped version of the good faith estimate requires lenders to document their fees and penalties for pre-payment on these standard forms. HUD is now requiring lenders to issue these forms within three days of a loan application. It’s hoped that the easy to read format will enable buyers to understand all that is required by each lender and use this information to shop around for the best deal.
Additional guidelines require that all lenders list there fee’s under one origination fee. Once this total is given, lenders cannot change any of these sub-origination fees. Only the service and recording charges can be increased by a combined 10% from the good faith estimate. Other charges such as third parties estimates do not fall under these guidelines.
Typically, Title insurance is one of the largest fees that borrowers are required to pay. This new HUD-1 form also lets the potential borrow know that they are not required or bound to use the Title insurance company that is being quoted by the mortgage lender. Price ranges for Title insurance can vary dramatically. Due to the variance in price from one title insurance carrier to the other, it is recommended that buyers do their homework and shop around for the best price available. HUD is estimating that the use of this HUD-1 form will save each person almost $700 each.
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