With the arrival of a new year also came a new way to compare home loans.
On January 1, new rules went into effect, which mandate that all home loan applicants be given a new version of the Department of Housing and Urban Development’s “Good Faith Estimate” form.
The new form is designed to clarify what home loans will actually cost, which should make it easier for borrowers to compare home loans. All lenders must disclose their fees and put them in the same places on the form.
In addition to interest rates, there are other costs associated with loans that should be compared. There are what are typically known as “origination costs,” which are the fees a lender charges, and there are “settlement fees” – such as appraisal fees, title insurance, etc. – that are part of the costs.
The new regulations require that lenders disclose these fees uniformly and then stick to them. For example, if you are quoted a $300 appraisal fee on a Good Faith Estimate form, you cannot be charged more than 10 percent of the price quoted.
The idea, HUD says, is to make it easier for consumers to do an apples-to-apples comparison of different loan products. In fact, on the third page of the three-page form, there is a place to do a side-by-side comparison of up to four different loans and recognize what is the best deal.
Sometimes, borrowers get so caught up in what the interest rate or monthly payment is that they lose track of other costs associated with a loan, and it becomes more expensive than they thought.
HUD’s new efforts to improve transparency and uniformity should help you find the best loan deal more easily and make the home buying process easier, which is great for first-time home buyers in the Jacksonville NC – Camp Lejeune real estate market.