If you are a first-time homebuyer, you may be wondering how to compare Good Faith Estimates, those documents a lender provides disclosing the interest rate, the monthly payments, and settlement and closing costs. Understanding this, will help you negotiate the best mortgage deal.
First of all, remember, I’ve been in the mortgage business for over twelve years, so I understand how difficult they can be. The bottom line is that comparing Good Faith Estimates has always been a bit difficult. For example, how can someone who does not understand mortgage terms dissect ten pages of jargon? What about all the confusing fees?
New federal rules that took effect at the beginning of January “supposedly” will make it easier to read these Good Faith Estimates… by standardizing them and simplifying the format. We’ll see. They say that the new rules will help “disclose an adjusted origination charge,” and include “all the fees the lender controls as well as any points paid to lower the interest rate.”
The biggest change is that lenders will not be allowed to increase the origination fee from what is disclosed in the Good Faith Estimate. Other fees, like title services and recording charges, cannot increase by more than 10 percent from what was disclosed. Additionally, the new form requires that borrowers be informed that they do not have to accept the title insurer suggested by their lender.
While this may sound good originally, the problem is that this will cost more for the lender and in turn their “processing fees” will go up. People always ask about the junk fees, well, many times, the junk fees are dictated by policies that don’t really serve the client base. My opinion is that this is one of those policies.
Some experts estimate that these changes will help save borrowers an average of $700 on their loan costs. I don’t believe that for one bit. At a minimum, the new rules are going to create more questions about how to compare Good Faith Estimates.
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Clearly I need to do my homework to avoid the fee sharks. Not a bad business to “fee” people to death. No sweat involved. All you have to do is rely on people wanting a property as quickly as possible. These same people are more concerned about their monthly payment than the fine print or the “man behind the curtain”.