Good Faith Estimate And Hud-1 Forms Get A Face Lift

Perhaps you've heard the story from family, friends or colleagues; their unfortunate tales of unexpected costs and fees that surfaced in the days leading up to, or even on the day of their home closing. You may be wondering how did your friend's closing costs end up being so much higher than originally presented by their lender. Will this happen to you? Fortunately, the answer is "no."

As of January 1, 2010, The U.S. Department of Housing and Urban Development (HUD) has adopted new rules to which mortgage lenders must adhere. These rules were adopted to eliminate surprises at closing.

A Standardized Good Faith Estimate

Lenders have always been required to give borrowers a listing of all expected closing costs in the form of what is called a Good Faith Estimate (GFE). Before now, there was no consistency with the GFE forms. Each lender could use its own version; presenting different information in a different manner.

Now, lenders must use a standardized, three-page form. This form must be presented to you, at no charge, within 72 hours after you apply for a loan. The form is very well laid out and documented in easy-to-understand terms.

The highlight of the new GFE is that it clearly spells out:

1. Charges That Cannot Increase
   There are a handful of fees that lenders are now forbidden to change. These are the ones that they can control; such as origination fees and processing fees.


2. Charges That in Total Cannot Increase More than 10%
   Fees from third party services (selected by your lender) such as appraisals, surveys, and title insurance will not raise more than 10%. If for whatever reason, your lender exceeds these 10% tolerances, he must reimburse you.


3. Charges That Can Change
   Your initial escrow deposit, daily interest, homeowners insurance, and third party services chosen by you are not subject to the10% maximum as the lender does not have control over these factors.

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A detailed look at HUD's new and improved Good Faith Estimate and HUD-1 forms. See how the standardization of these forms will eliminate unwelcomed surprises at your home closing.

Elizabeth Dennis is an editor and writer for Newbuyer.com. NewBuyer selects and reviews auto and home buying resources to help buyers make confident, well-informed purchasing decisions. Newbuyer has recently launched its own collection of original home buying articles.

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