On January 1, 2010, new rules adopted by the Department of Housing and Urban Development go into effect. These rules are going to give borrowers a much more realistic estimate of what their closing costs are going to be so there are fewer surprises at the closing table.
- Good-faith estimates will now be on a uniform form, so borrowers can more easily compare settlement fees and loan charges among lenders.
- The form will break-down fees into three categories: those that can’t increase from original estimates, those that can increase by as much as 10% and those that the lender has no control over. Fees that can increase up to 10% are limited to a total 10% in that category so, if at closing, two items increase by 10%, the most the borrower will pay is the 10%.
Although the new rules do not guarantee a borrower’s actual closing costs will be exactly what the good-faith estimate states, it will be a lot better and closer to reality than many of these estimates currently are. The fact that these new uniform good-faith estimates are also going to be included in a new HUD-1 will allow borrowers to compare what they were told with the actual charges. The new HUD-1 will also break out the title insurance premiums so that the borrower can see what percentage is going to the insurance and what portion is a fee to the title agent.
What should you do if you are shopping for a mortgage now and plan on purchasing a home before the new rules come out? Use HUD’s shopping for a mortgage brochure to get you started.