New Good Faith Estimate Coming to Lender Near You
On January 1, 2010 a new set of requirements kicks in for all mortgage lenders. The biggest change will be to the Good Faith Estimate (GFE). In the past this form could be used by a consumer to determine what their total monthly payment would be, how much money they would need at closing and what they were being charged for each individual item on the HUD-1 Settlement Statement.
The purpose of the new GFE has essentially been redefined. It now is really going to become a tool for consumers to use to accurately compare and shop mortgage companies. In the past, people would collect GFEs from several companies, compare them, and then chose a lender. The flaw with this is that lenders were not bound by any of the numbers listed. The could tell you one set of charges today and change them tomorrow if they wanted to, for no specific reason.
That has now changed. Now, when a lender issues GFE they are essential required to make sure your charges at closing match what you were told up front. There are certain events or “change or circumstance” that allows the numbers to be altered–but only in a way that directly follows whatever that change was. So, essentially the days of consumers being jerked around by misleading or lying lenders should be coming to an end.
That is the good part.
The bad part–the new GFE will not tell you what your total monthly payment will be, because the property taxes and home owners insurance are not a part of it–at least not in the format of showing you a monthly payment. Also, no where on the GFE does it tell you how much cash you will need at the closing. It will tell you the closing costs, but not the money needed for prepaid expenses such as setting up your escrow account. Also, there is no place for you to see if the seller is paying any of your closing costs and what that might do to lower your number needed.
I’ll go into more detail over the next several weeks on this topic as it becomes reality. But, be warned, if you are getting a loan in the next couple of months there will likely be a fair amount of confusion.
Also, check out my new radio show: Sweet Home Minnesota this Sunday from 2-3 pm where we’ll get into this topic, what’s going on in the Twin Cities housing market and a preview of some upcoming tax benefits for home owners.
