Houses for Sale in San Diego has Tips on Good Faith Estimates for Prospective Homeowners
Jan 26th, 2010 by Kathleen Behrens
The Real Estate Settlement Procedures Act (RESPA) was initially passed in 1974 to provide protection for borrowers who obtain federally related real estate loans. This federal loan disclosure law mandates that loan originators such as lenders and mortgage brokers must provide borrowers with a Good Faith Estimate. A Good Faith Estimate is a document which states key loan terms and an estimate of the closing costs a borrower will be expected to pay to obtain a specific loan and close escrow. By providing specific financial details, Good Faith Estimates allow borrowers to compare the cost of escrow services among different lending institutions and make informed decisions regarding their real estate transactions.
Unfortunately, some lenders and mortgage brokers were intentionally underestimating fees on their Good Faith Estimates in order to entice borrowers to choose to do business with their company. Then just before escrow was scheduled to close, borrowers would find out the actual costs were going to be significantly higher. Without a law to regulate Good Faith Estimates, there was no system to hold loan originators accountable for providing honest estimates.
The Department of Housing and Urban Development published new RESPA regulations, which went into effect on January 1, 2010. The new regulations require lender related fees to be identical from the time of the initial application through the close of escrow. A ten percent tolerance is allowed for costs related to title insurance and closing fees. Now lenders are being held responsible for paying costs which exceed the ten percent allowance in the Good Faith Estimate.
However, borrowers must still proceed with caution. Some lending institutions are attempting to evade the new regulations by providing fill in the blank worksheets instead of Good Faith Estimates. Lenders can do this if a complete application has not been filed. Borrowers should specifically request a Good Faith Estimate from any lender or mortgage broker with whom they are considering doing business. According to the HUD website, an application is defined as, “The submission of a borrower’s financial information in anticipation of a credit decision relating to a federally related mortgage loan, which shall include the following:”
- the borrower’s name
- the borrower’s monthly income
- the borrower’s social security number to obtain a credit report
- the property address
- an estimate of the value of the property
- any other information deemed necessary by the loan originator
The loan originator must issue a Good Faith Estimate within three business days after receiving an application or the information to complete an application. A fee may be charged for the cost of the credit report. That is the only fee which may be charged until an applicant receives a Good Faith Estimate and indicates intent to proceed with the loan which is covered by the Good Faith Estimate. The borrower has ten business days to notify the loan originator of his or her intent to proceed unless the loan originator has agreed to a longer period of time.
If you are interested in houses for sale in San Diego, it may be in your best interest to contact multiple lenders to compare the cost of escrow services with different lending institutions and specifically request a Good Faith Estimate from each one. Use the search links on the right to begin searching the entire San Diego Multiple Listing Service (MLS) for houses for sale in San Diego, including short sales and foreclosures, or call 858-259-1000 to speak with one of the San Diego Realtors at Petrone Properties. We will be happy to custom design a recurring search of the San Diego MLS for houses for sale in San Diego based upon the specific search criteria you provide. You can choose to receive email updates with listings that meet your specific criteria every day, once a week, or any frequency in between. Let us know how we can help you with your search of houses for sale in San Diego!