The U.S. Department of Housing and Urban Development (HUD) just implemented new rules that will standardize the way loan information is presented to the consumer and help them make a better decision about the lender who is best for them.
New Federal rules mandate a standard, three-page Good Faith Estimate that urges consumers to shop around for the best loan and helps them compare lenders’ offerings. These rules are an update of the Real Estate Settlement Procedures Act, known as RESPA.
One difficulty of shopping for mortgages is that the lender with the lowest rates often isn’t offering the best deal. High lender fees can wipe out the benefits of low rates.
To address those problems, the new estimate form requires lenders to wrap all the fees they control into one origination charge. That lets you easily compare one lender’s fees with another’s. Experts recommend that borrowers focus on two items as they shop: the interest rate and the adjusted origination charge, which includes any points paid to lower the rate.
Good Faith Estimates have been around for a long time, but there was no standard format. Under the new rules, lenders and mortgage brokers are required to give consumers the standard estimate forms within three days of receiving a loan application. Lenders are not allowed to increase the origination fee from the estimate.
Will all this make a big difference? Experts think the new rules will definitely help, but they may not be a cure-all.