As of January 1, mortgage lenders have been required to use a new Good Faith Estimate (GFE) produced by the Department of Housing and Urban Development.
According to government reports, and some consumer advocates who haven’t been subjected to use of the form, the new GFE (Good Faith Estimate) is just what home-buyers need – it simplifies and standardizes the fees that mortgage lenders charge and makes it easy to compare costs between lenders.
But once again, we see rules and forms being written by people who haven’t had the experience to know how those rules and forms will affect consumers.
It is true that all mortgage lenders have to use the same form now. But conscientious lenders are also using their own “old” forms in order to show consumers the truth of what they’re paying for. The new GFE lumps fees and costs together in a manner that prevents the buyer from knowing exactly what’s included.
It is also true that once the lender has entered his or her fees on the GFE and the buyer has agreed to them, they can’t change. So there are no last minute increases in fees. There’s even a limit on how much “estimated” fees such as appraisals and inspections can increase.
But there is where the benefit stops.
To begin with, because the lender is locked in to the interest rate and the fees, they won’t pre-approve a buyer and commit themselves to anything until that buyer has an accepted offer on a home. So buyers can’t go shopping with a pre-approval that would give them a better chance when negotiating for a home.
Second, many lenders will not provide the GFE until the buyer has paid for both a credit report and a loan application. That loan application could cost as much as $400. According to reports, Bank of America is now charging $300.
That means the buyer cannot “shop” for the best terms on a loan without making application with several lenders – and paying application fees with several lenders.
So before shopping for your home, call a few lenders and ask about their policies. Find out if you can make application without a fee. Then keep a list of those lenders who don’t charge an application fee – so you’ll be ready to shop for a loan just as soon as you have an accepted offer on a home.
It stands to reason that they need to check your credit scores before committing to an interest rate and fees, so you’ll need to pay for that everywhere you go. But I’ve never heard of anyone charging more than $60 for this, and many charge far less.
Author: Mike Clover
CreditScoreQuick.com your resource for credit reports, credit cards, loans and ground breaking credit news.
