The new Good Faith Estimates (GFE – example here) went into effect for home loan borrowers on January 1, 2010. This is the form that spells out how much the fees, costs, etc… will be for a home buyer and what exactly they are for. These can often be cumbersome and confusing. Accordingly, the intention of creating the new universal form was to foster more transparency in the lending process. However, as could be expected with any substantial change, there has been much debate about the merit of the new form.
In the current real estate market the most common problems that occur in the home buying process concern the home loan in one way or another. It is a difficult lending environment in general and the average home buyer will likely face a number of obstacles before securing their home loan. One of the most frustrating events for a home buyer is discovering that fees, costs, pre-paids, and the like have changed by the closing date from the initial consultation with her/his mortgage lender. The new GFE is supposed to address this point by requiring greater accuracy in the initial estimate. This is absolutely wonderful and simple in theory. However, things can and will change throughout the loan process and responsible home buyers should not rely on the initial GFE exclusively.
In my professional opinion, the single most important thing a buyer can do to protect their interests (and pocket books) is to work with someone local, reputable, and knowledgeable. As the transaction evolves, and changes occur in the loan process/final numbers, the most important thing is understand WHY! Forms and processes with evolve and change periodically. Interest rates will rise and fall. But the one constant that is required for any home buyer to leave a transaction feeling confident about their home loan is that they need to work a quality lender.
Anyone interested in reading further about the new GFE should check out the article on The Lending Journal for an entertaining and easy to read take on the change. And please don’t hesitate to get in contact with me if you have any specific questions about this or any other real estate related questions!
