Consumers will no longer be left in the dark about the closing costs involved to complete the sale or purchase of a home- costs that account for an average of 5% of the purchase price. Changes in the Real Estate Settlement Procedures Act (RESPA) that took effect on January 1, 2010 require lenders to fully disclose all closing costs including the costs of obtaining a loan and estimated costs for title insurance, settlement and other services within three days after a buyer applies for a mortgage. Forms used in the closing process, including the Good Faith Estimate (GFE) and the HUD-1 Settlement Statement, have been overhauled to make it easier for consumers to understand estimated costs and compare them with final costs at closing. The new GFE encourages consumers to shop and compare fees from various lenders before choosing a mortgage. The new HUD-1 makes it easy to compare the GFE estimates with the final HUD-1 closing statement and flag discrepancies prior to closing. However, estimates provided by the Good Faith Estimate are usually binding for only ten days, unless there are certain changed circumstances. Buyers have only a few weeks to complete required tasks like reviewing their title report and retaining settlement services before the closing. They may have to act quickly to meet deadlines in sales contracts. “The message to buyers is don’t delay. Take control by working with your real estate agent to shop for and compare closing costs in your area. Compare the fees in your Good Faith Estimate with actual costs and the services provided by competing vendors,” said Tony Farwell, CEO of Closing.com, a website that provides a one-stop-shop for real estate closing and related services. The Department of Housing and Urban Development estimates that consumers will save an average of $668 on every loan as a result of the new regulations. Farwell said that home buyers, working with their real estate professionals, should formulate a strategy to find the best vendors for their closing service needs in the short time available. Here are some questions to cover with a real estate agent or broker: 1. Which closing services are required in your area and which are optional? Local laws and customs vary. Your agent may strongly recommend that you include optional services like a home inspection and home warranty. 2. On the Good Faith Estimate, did the lender use vendors who know your market well? It’s a good idea to shop for alternatives that might be less expensive or provide better service. Many vendors provide a higher, blended rate for lender’s to use in their GFEs that would be more costly than a quote for your transaction or property. 3. Upon reviewing your GFE, can you identify areas where you can save money without compromising quality? Smart buyers can save hundreds, even thousands by finding their own closing cost providers. |