Big Changes to Good Faith Estimate Benefit BUYERS!

On January 1st, we embark on a new year…and a new Good Faith Estimate form that is now three pages long. The focus of this new form is transparency: In light of all the misconduct, greed and subsequent misfortune the financial industry has been subject to, the new form forces lenders to be brutally honest about terms and conditions, leaving little up for misinterpretation.

Borrowers will be pleased at the abundance of new information found within this three-page document.  It's hard to identify one most important piece of information, but among the most useful are the following:

• Summary of charges. This basic summary now includes easy-to-understand language and layperson terminology.
• Important dates. You'll know exactly how long your rate quote is good for, and terms for locking it in.
• Basic loan summary. Rate, amount, terms, whether your rate is adjustable and if there is a pre-payment penalty.
• Origination fees. What fees are applied by the lender – and what are they for? No longer a mystery!
• Changes to charges. A clear explanation of which charges are set at their quoted cost and which could be different at closing. Of those that can be changed, an explanation will also be provided for limits on increases.
• Additional charges. An explanation of other charges applied by third parties.
• A trade-off table. This useful bit of information demonstrates how payments and fees adjust for the same loan based on the rate being higher or lower than that quoted.
• Shopping cart. A useful way for borrowers to compare lenders.

Some lenders have been using this level of transparency all along, and for them this new form is no big deal. For others, who had a business model based on misleading borrowers by conveniently omitting information, the Good Faith Estimate 2010 will take some getting used to. For borrowers, this is nothing but good news!

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