Why Doesn’t the HUD-1 Match the Good Faith Estimate and What Can You Do About It?
A good faith estimate is a way for buyers to understand the costs of a loan before they actually have to pay them. Laws and regulations are in place that require lenders to disclose these fees and costs so there are no surprises come closing time. New rules show that if the GFE is far below the actual closing costs the buyer may be entitled to a refund. This law is called the Real Estate Settlement Procedures Act or RESPA. This protection statute ensures that consumers receive accurate information and costs for the real estate deal. The settlement or closing costs will include legal fees, taxes, courier and document preparation services, recording fees, title insurance and searches and notary services.
The good faith estimate can provide information of borrowers can use to make sure they receiving the best deal or rate on their home loan. Borrowers can request several good faith estimates from different companies and compared those estimates to find a lender with the best deal.
Mortgage brokers will often provide a worksheet to borrowers with a rough estimate and even though these are legitimate they are not guaranteed by RESPA. A formal good faith estimate is guaranteed and they must not underestimate the closing costs by more than a specific amount known as the "tolerance level". If the good faith estimate is too low, the lender may have to offer the borrower a refund to cover the discrepancy.
The good faith estimate is just that; an estimate. The HUD-1 form is the actual costs. The buyer is entitled to view this form within 24 hours before the actual settlement. If there is a difference between the good faith estimate and the HUD-1 and the difference exceeds the tolerance levels, borrowers may be eligible for a refund.
The good thing is that the HUD-1 actual costs cannot exceed the GFE so you will know how much you will be paying and perhaps a lot less.
For more information on good faith estimates, HUD-1 and RESPA please give me a call anytime. I would love to help you make sense of all this.
Comments(1)