Federal rules now require mortgage lenders and brokers to give consumers better estimates of the costs they incur when taking out home loans, and mandate a standard three-page Good Faith Estimate that urges consumers to shop around for the best loan and helps them compare lenders’ offerings. The rules, announced by the Department of Housing and Urban Development in November 2008, are an update of the Real Estate Settlement Procedures Act, a 1974 law known as Respa. One difficulty of shopping for mortgages is that the lender with the lowest rates sometimes isn’t offering the best deal. High fees can wipe out the benefits of low rates, and little-noticed features such as prepayment penalties can burn borrowers.
Even for savvy consumers, it is hard to compare different combinations of rates, “points” (paid in exchange for a lower rate), fees and other terms. Lenders often sprinkle in lots of confusing charges, such as processing and messenger fees. Dickering over the smaller fees could distract borrowers from the bigger picture of total costs. The new estimate form requires lenders to wrap all the fees they control into one “origination charge.” HUD has estimated that the revised requirements will save $700 for the typical consumer, partly because of the greater ability to shop intelligently.
I’m glad they’re getting stricter with the language of real estate. Most people just want the house and won’t understand what they’re paying for, the other’s are smarter when it comes to buying houses.
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It isn’t fair to the average consumer who doesn’t get to see the final price when they finally decide to buy a house. It’s like buying a squash, at face value and finding out there are fees for producing it, transporting it, cleaning it, making it look pretty? Face value!
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