Tag Archives: good faith estimate

5 Biggest Mistakes Home Buyers Make

June 20, 2012 jd

Daily Real Estate News | Wednesday, June 20, 2012

Some home buyers fall for common pitfalls when purchasing a home. How can you help make sure your clients don’t fall for one?

Credit.com recently featured some of the biggest mistakes home buyers often make. Their list included:

1. Trying to fix credit scores before buying a home.

Home buyers may do more harm than good if they don’t consult a financial expert first. “Even paying down credit card balances, which is a good thing as far as your credit scores and debt ratios are concerned, could be a problem if it leaves you short the cash you need to qualify to get the loan,” says Gerri Detweiler, Credit.com’s personal finance expert.

2. Not considering the future enough in their purchase.

Buyers should consider what they want out of a house not just for today but also five or 10 years down the road. Do they plan to expand their family? If so, they may need a bigger home and want a different location. Also, how long do they plan on staying at the home? That can help determine the type of mortgage that makes the most sense for them too.

3. Failing to research financing enough.

First comes the home and then the financing? Not in today’s market. Home shoppers should get prequalified for a mortgage before they start shopping for a home so they know what they can afford. “The time to make decisions about your mortgage needs is not during this 10-day window [after you sign a contract]; at most, this is time to shop for rates and fees and such,” says Keith Gumbinger, vice president of HSH.com. “Evaluating your credit, deciding on a product you prefer, how much down payment you feel comfortable making, whether you want to pay fees or points [and, if so, how much] and even shopping for a lender [getting preapproved] should happen well in advance of even wandering through the market looking at houses.”

4. Making the assumption that the Good Faith Estimate is always what you pay at closing.

The form lenders provide that estimates closing costs is not set in stone. Closing costs may actually be more, so buyers need to be prepared. Closing costs generally are about 3 percent to 5 percent of the loan amount. “Shop around and compare the Good Faith Estimate provided by the lender with that of two or three other lenders,” suggests Ryan Himmel, a CPA and founder of BIDaWIZ, a tax advice resource. “If there is a significant disparity in estimates, then request an explanation from the lender to determine if you would like to move forward.”

5. Failing to budget for home expenses.

Budgeting to purchase the home isn’t all new home owners should be squeezing in their budget. They’d be wise to not forget to budget for maintaining the home too. New home owners should budget for an increase in utility bills as well as for future maintenance and repair costs, such as repairing a furnace or roof.

Source: “10 Mistakes New Homebuyers Make,” Credit.com (2012)

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Real Estate

Sorting Through Lending Costs

July 31, 2011 jd

house made of dollars — Picture courtesy of Showcase Realty

Although the Consumer Financial Protection Bureau, the federal agency created to oversee mortgage lending, only recently opened, the Bureau started looking at ways to protect consumers during the loan-shopping period long before it’s official start date.

Making sense of the story:

The bureau is exploring avenues for combining the two forms that borrowers currently receive – the three-page Good Faith Estimate and the two-page Truth in Lending Act form. These forms tell would-be borrowers the terms of their loan – for instance, how payments on an adjustable-rate mortgage change. They also lay out fees.
Fees can make a big difference when comparison shopping. The simplest way to compare loans is by looking at the Annual Percentage Rate, or A.P.R. That calculation rolls in fees as well as the stated interest rate. Because lenders are required to follow the same formula, useful comparisons can be made.
Borrowers are advised to request a Good Faith Estimate from every lender they approach. While the Good Faith Estimate is in place to help borrowers, according to one lender, some lenders may provide interest-rate quotations that expire almost instantaneously, making it difficult for buyers to comparison shop.
Borrowers should be wary if they receive two or three different Good Faith Estimates and there is a difference of several thousand dollars.

Read the full story

For all your real estate needs
Call or email:
John J. O’Dell Realtor® GRI
O’Dell Realty
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<a href=”mailto:jodell@nevadacounty.com”>jodell@nevadacounty.com</a>

Real Estate

Your Mortgage Closing Costs Forced to be More Transparent

January 20, 2010 jd

Big changes have finally arrived in making good faith estimates when getting a home loan. The following are required on good faith estimates as of January 1st of this year:

Consistency.

Lenders are now required to use a uniform three-page document when they give prospective borrowers a good faith estimate, says Vicki Bott, deputy assistant secretary for single-family housing at HUD.

Lenders also are required to provide the document within 72 hours after prospective borrowers apply for a loan.

This will allow consumers to figure out a loan’s total cost, including fees, and compare loan offers on an apples-to-apples basis, Bott says. “We encourage consumers to shop for the best rates and fees, and not just the best rate,” she says.

Transparency.

Many borrowers who bought homes during the housing boom later discovered that their loans contained hidden bombs that made their mortgages unaffordable. The new good faith estimate requires lenders to disclose features that could drive up costs. For example, the document requires lenders to disclose whether your interest rate will rise — as would be the case with an adjustable-rate mortgage — and if so, by how much. Lenders will also be asked whether the loan includes balloon payments or imposes penalties for paying the loan off early.

“All of these are really important questions,” says Helene Raynaud, vice president of housing for the National Foundation for Credit Counseling. “It will be able to raise red flags for consumers.”

Trade-offs.

Some lenders offer borrowers a lower interest rate in exchange for higher upfront costs — or vice versa. A new table in the good faith estimate (see box) helps borrowers compare how different interest rates and settlement charges will affect monthly payments.

Reliability.

Lenders are required by law to give mortgage applicants a copy of their settlement costs, known as a HUD-1, at least one day before closing. In the past, though, many borrowers discovered that the costs shown on the HUD-1 bore little connection to those provided in the good faith estimate.

The new rules will make it much more difficult for lenders to depart from their good faith estimates, Bott says. The new HUD-1 includes a line-by-line comparison to the good faith estimate, making it easy to identify any change in costs.

Lenders are prohibited from increasing costs they control, such as origination and processing fees. Fees for third-party services, such as appraisals and title insurance, can increase no more than 10% from those provided in the good faith estimate, as long as the borrowers use providers selected by the lender. The limit doesn’t apply if borrowers select their own third-party providers.

Other costs that aren’t subject to the 10% limit include the initial deposit for the borrower’s escrow account, daily interest charges and homeowner’s insurance (see box).

Source: USA Today

HUD has published a guide for home buyers, Shopping for Your Home Loan: HUD’s Settlement Cost Booklet. You can find it at HUD

Reprinted for educational purposes

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