Beginning January 1 2010, lenders are now required to issue a new good faith estimate form to buyer’s applying for a mortgage loan. The reason given by HUD is “help consumers to shop for the lowest cost mortgage and avoid costly and potentially harmful loan offers”. HUD’s press release can be found here.
The good news for borrowers is all lenders will be required to use the same form. The idea being that buyers can easily compare loans and loan charges from different lenders and that’s a good thing. Additionally, the numbers from the Good Faith Estimate will tie directly to the final HUD-1 settlement statement at closing. Some of the numbers may not change from those originally quoted; some may increase by up to 10%; and others may increase by any amount (homeowners insurance for example).
On the downside, in simplifying the form, some numbers will be combined and borrowers will not see a breakdown of some of the charges, unless offered by the lender on another form. Also, some lenders may not give the good faith estimate up front since they will be locked-in to some of the numbers.
The form also does not include taxes and insurance in estimated payments. It also does not show exactly how much a borrower will have to bring to closing, especially if the Seller is going to pay some of the Buyer’s closing costs.
My suggestion: find a lender who will furnish the Good Faith Estimate up-front and consult with your Realtor regarding total estimate payments and amount to bring to closing.
If you need a recommendation for a great loan officer, let me know.