Anybody who attempted to apply for a loan prior to 2010 knows how vague and difficult it used to be to apply for a loan. With hidden fees and surprise increases that could come months later, it was difficult to make comparisons between different mortgages. But as of January 1st, 2010, this ability to make comparisons became easier thanks to the Good Faith Estimate.
The Department of Housing and Urban Development now requires all lenders and brokers to supply applicants with a standardized form within three business days of the lender or broker receiving the application. What does this do? Not only does it hold the lenders and brokers more accountable for the loan offers and costs, but it aids the borrower in understanding what they are really getting in to.
With the reduction of vague wording, borrowers are now able to clearly read the main features of the loan including the amount, term, initial interest rate and total monthly payment. All of the questions that borrowers of yesteryear use to wonder are now in simple terms. Are you worried that your interest rate or your loan balance may rise even if you are making payments on time? Is it possible for your monthly payment to rise? Borrowers today no longer have to worry with the Good Faith Estimate because all of these questions are answered on the first page.
And it gets better. You no longer receive an itemized list of charges that may have confused you before. Now you get one sum of the fees and you are now able to see which charges are coming from the lender and which are coming from third parties. Are you using a mortgage broker and concerned about how much he is getting paid? You no longer have to worry about this since the form also lays that out in black and white for you as well.
This post was written by Stephen Hachey. Follow Stephen on Google, Facebook, Twitter & Linkedin.