No More Good Faith Estimate – Why It’s Better For Buyers
Buyers in the past have primarily stayed put with a lender once they get pre-approved. Now new closing procedures will give them a better opportunity to comparison-shop loans at a later stage of the buying process.
Changes late last year to disclosure rules and transactions will give borrowers time to shop around and compare loan offers from other lenders after they apply for a mortgage. Promoted as “Know Before You Owe,” the new rules require more detailed information to be disclosed, more time to accept the loan, and no unwanted surprises.
Every buyer now will get a document called a Loan Estimate three business days after applying for a mortgage. This replaces the previous HUD-1 Settlement Statement or Good Faith Estimate and the Truth in Lending disclosures.
More Detailed Cost Disclosures
Here’s what buyers can expect from this three-page document.
- Information on the interest rate, annual percentage rate, monthly principal-and-interest payments, property taxes, insurance and other escrow items.
- Itemized charges expected at closing
- The amount of cash you will need at closing.
Most importantly, these costs can’t be increased once they are disclosed. This is different than in the past when buyers could be uncertain what the final expenses would be for their closing.
Time to Shop Around
After you receive your Loan Estimate, you have 10 days to compare it to other lenders. Here’s your chance to see if another lender will better meet your financial needs.
Since it is later in the buying process, you may not want to shop around again. Buying a home can be exhausting. You’ve been through a lot already to get pre-approved, find a home, make an offer, and to have your offer accepted by the seller. Whew!
You might want this all to be done just so you can meet any closing dates and other pressing concerns with the sale. But remember, you CAN shop around and take advantage of the 10 days before you accept a loan offer.
Keep in mind, you should go with a reputable lender with whom you trust and know can help close the sale for you. That’s very important!
No Surprises at Closing
No matter if you comparison-shop or not, this new Loan Estimate document provides excellent details so you know what to expect at your closing and how much cash you need that day. No one wants any last-minute surprises from their lender!
Let us know if you have any questions about the Loan Estimate document and comparison-shopping at this late stage.