As of early 2010, lenders have been making their mortgage loan information more straight-forward and consumer friendly. It used to be that long, complicated forms where confusing consumers and causing bad decisions to be made. With the many changes in the mortgage industry, consumers will now benefit from the revisions and less complex documents necessary to obtain a mortgage as regulated by the new Real Estate Settlement Procedures Act (RESPA).
One prime example of an easier form is the Good Faith Estimate. This form is what outlines the fees, interest, and other financial terms involved in a mortgage loan. The form is meant to serve as a comparison piece for consumers who are shopping for mortgage offers. The new form has advanced from a single page to a three-page document. It more clearly outlines the lender fees and third-party fees that are part of the loan. In the past, consumers have often been left lost in the pile of numbers. The new form is meant to make the numbers game more clarified and comprehensible to all borrowers.
What Is There To Know About GFEs?
A Good Faith Estimate is a document provided when you applying for the loan. Along with the GFE, a new Settlement Statement will provide an extensive breakdown of the final costs before closing. Borrowers can use the figures on the documents to make more accurate comparisons between loans.
Other sections of the GFE include:
Origination Charges – this section includes all of the fees the lender is charging you for granting the loan. This section also details the points being paid or credited to the loan that lowers the interest rate.
Settlement Charges – this section includes the details about costs from a third-party including title insurance and transfer taxes. There is also information contained about the services a buyer can shop for on their own rather than accepting the referral of a lender.
Rate Increases – this section details the balance of the initial loan, the rate of interest, and the monthly payment amounts. It will be indicated whether or not any of the factors can increase during the life of the loan, and if so, by how much. All prepayment penalties and balloon payments must also be disclosed about the loan. This section will also point out which charges as part of the Good Faith Estimate can not be increased at the time of settling the loan.
Be an Informed Buyer
When you are looking to secure a mortgage loan, it may be all you can do to slow down and take the process slowly. But educating yourself on the facts and figures of mortgage loan comparisons is the smartest thing you can do to protect your investments and secure the mortgage that is right for you. As mortgage documentation is getting clearer and rules are in place to better protect the consumer, it is your job as a borrower to make wise and educated decisions about your mortgage loan before making any commitments in writing.
