New Form Makes Loan Shopping Easier


The U.S. Housing and Urban Development Agency is out with a brand new shiny toy that helps home borrowers figure out how much they’ll pay in closing costs from lender to lender. It’s called the Standard Good Faith Estimate (GFE) and the federal government is hoping that consumers will give it a close look.

Some background, first. The HUD GFE is the form consumers use when hunting down a good mortgage deal. It includes the loan fees, loan terms and other details that, taken together, reflect the amount of money that a mortgage customer must pay to buy their dream home.

This year, the HUD rolled out the new estimate, which all mortgage loan originators must use in real estate transactions. The new GFE forms issued by HUD are billed by the government agency as user-friendly, especially for home mortgage borrowers.

In past years, GFEs weren’t standardized, and different lenders would use different calculations to justify their fees and costs. As more mortgage servicers entered the real estate market, the forms grew increasingly complicated. "The problem in the past," said Brian Sullivan, a HUD spokesman, "was that there was no standard good faith estimate."

HUD’s big selling point is the standardized GFE form itself. Long criticized by real estate professionals as being too onerous and too confusing, the new form makes it much easier to compare various mortgage loan options. Better yet, it has a uniform look and feel that mortgage loan originators must abide by.

Case in point: the form’s "tradeoff" section is actually a table that enables mortgage loan customers to easily calculate “points” — the upfront fees that borrowers may pay in exchange for a lower interest rate. Borrowers can ask their potential lenders to fill out the tradeoff table, thus making it easier for borrowers to see which lender is offering the best deals.

The new HUD GFE form also has a shopping card section, which allows mortgage consumers to review GFEs from multiple mortgage loan brokers.

Mortgage lenders must provide loan customers with a new GFE within three days of applying for a home loan, and must stand by the numbers included on the GFE for 10 days. When a loan consumer clinches a deal with a mortgage provider, the provider must abide by any numbers, including loan fees that appear on the GFE. That means no more bait-and-switch on loan costs and fees, although lenders may be hesitant to pre-approve borrowers if they’re going to be held to their GFE numbers by the federal government.

To get the most out of the new GFE, make sure to look for rates from different providers daily (even hourly). Remember, interest rates change every day. To get a good apples-to-apples comparison, make sure you shop for rates at least on the same day.

To get a more detailed overview of the new HUD GFE for yourself, click here.

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