Legislation such as the federal Truth in Lending Act make it easier for homebuyers to determine how much a mortgage will charge them in interest and fees. In the wake of the 21st century’s real-estate collapse, the Department of Housing and Urban Development has adopted additional rules to assist homebuyers compare mortgages and decide which is best for them. HUD estimates these new rules can save approximately $700 at closure.
Uniformity of Costs
Lenders must present to creditors a good-faith estimate of costs in a uniform three-page document under HUD’s new 2010 rules, according to the Federal Deposit Insurance Corporation. By requiring uniformity, the government expects to make it easier for borrowers to compare interest rates and fees offered by different companies and also to figure out which loan is really the very best price for them.
When rates drove their obligations to speeds many homeowners have been amazed. HUD’s new rules, according to USA Today, require lenders to include within their good-faith estimates features that could potentially drive up costs in the future, such as increasing interest rates, balloon payments and penalties for paying off loans .
Lenders must give prospective borrowers a copy of their settlement costs at least one day before closure, USA Today says. Under HUD’s new rules, the form must include a line-by-line comparison using the initial good-faith estimate so that consumers will easily spot any last-minute changes. The paper reported that by hitting borrowers using a last-minute increase in fees or interest rates, lenders place borrowers in a tight spot: Should they refuse to register on to the new modifications, they need to look for a new loan and might lose the home they want.
HUD limits how much closing costs can rise above the good-faith estimate, according to the FDIC. Lenders can’t increase program fees, origination fees and other penalties which go right into their pockets. Fees for third-party services, such as title insurance and evaluations, can’t rise over 10 percent so long as the buyer employs the creditor’s recommended service providers.