If you’ve ever shopped for a mortgage before, you probably know that mortgages come in all shapes and sizes… meaning that they have varying fees, interest rates and closing costs. So how do you compare mortgages apples to apples? It’s easier now that the the Department of Housing and Urban Development requires all lenders to use a standardized Good Faith Estimate (GFE). Since January 1, 2010, all mortgage brokers and lenders are required to use a standardized GFE disclosing the mortgage’s terms and closing costs and we’re required to provide this form to you within three business days of receiving your mortgage application. Now… a GFE is nothing new. We’ve all provided our potential borrowers with GFEs in the past. What’s new is that the form is standardized and easy to read and understand. Download the form here and take a look at it.
Good Faith Estimate (GFE) (143.2 KiB, 142 hits)
You’ll see that it states quite clearly right on the first page the amount of the mortgage that you are applying for as well as the term (length of time), the interest rate and your total monthly payment. But it covers far more than that… it lets you know if your interest rate can increase or if your loan balance can increase or if your monthly payment can increase. It also indicates charges coming from your lender and charges coming from third-party vendors… and much more. And it’s all in an easy-to-read format.
When the new GFE Form was introduced in January 2010, the entire mortgage industry thought it was totally unnecessary and one of the worst things to come along in years, and that there was nothing wrong with the old form. As the President of Homerica Mortgage Corporation and as someone who has been in the mortgage industry for over 30 years, I felt the same way about this new form in the beginning. In some ways, the new form is more confusing to the consumer because it lacks the detail that was provided before. As a result, at Homerica Mortgage Corporation, we always provide our clients with an Itemized Fee Worksheet that goes through every cost and fee included in the Good Faith Estimate (GFE) and we go through a thorough explanation with our clients, so that you understand exactly what is involved in the transaction.
By the way, “Good Faith Estimate” is now, in my opinion, a misnomer. This new and improved Good Faith Estimate introduced in January 2010 should actually be called a Good Faith Guarantee. Prior to the introduction of this new form, at the time that we provided borrowers with their closing cost estimates, we were frequently asked, “Why are your closing costs higher than most of the other lenders and brokers that we’ve spoken to?” The reality was and is true to this day. Our estimates were always spot on, and frequently, those other lenders and brokers were lowballing their estimates to lure people into applying with them. Borrowers thought they were getting a better deal from those other lenders and brokers. Truthfully? Closing cost are closing costs, and whether you go with Homerica Mortgage Corporation or another lender, the bottom line is going to be almost the same. Closing costs really do not vary in a material manner, unless that other lender or broker is charging you more than they should for some of your closing costs. It’s a rare instance that someone would overcharge for closing costs because, after all, we do live in a very competitive world.
The new rules regarding the new GFE form require that the lender or broker reimburse you if their estimate is off by more than 10% in certain areas, and 0% in other areas. As a result, the practice of lowballing closing costs has all but stopped, and you are much less likely to fall prey to the unscrupulous lender or broker who is trying to lure you into applying with them. Isn’t it amazing that we never hear that our estimates are high now? Could it be that they never were?
At Homerica Mortgage Corporation, we’re confident that we can offer you the best home loan for your financial situation. We encourage you to shop around. Then call us at 877-451-3100 or use our Contact Us page to inquire about our low interest rates. For more information on closing costs, download HUD’s booklet on settlement costs below.
HUD's Settlement Cost Booklet for 2011 (1.2 MiB, 919 hits)
– Bruce Lublin, President
Homerica Mortgage Corporation – Your first choice for mortgages in New York and Connecticut
