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Alan Blinderis an American economist, on the faculty of Princeton University. He has served as the Deputy Assistant Director of the Congressional Budget Office, on President Bill Clinton’s Council of Economic Advisors, and as the Vice Chairman on the Board of Governors of the Federal Reserve System. Sounds like a government conformist right? Wrong

He has recently wrote a controversial column for the Foreign Affairs magazine about globalization in which he opined that globalization could cause more disruptions in service jobs than originally believed. He says that he still believes that globalization would be a net plus for the United States. This analysis has not been published in a peer-reviewed journal of economics. His views on this issue is not widely accepted by economists.

Then comes this gem: Six Fingers of Blame in the Mortgage Mess

Who’s the first finger? Everyone who has a mortgage.

The first finger points at households who borrowed recklessly to buy homes, often saddling themselves with mortgages that were all too likely to default. They should have known better. But what can we do to guard against it happening again?

Not much, I’m afraid. Gullible consumers have been around since Adam consumed that apple. Greater financial literacy might help, but I’m dubious about our ability to deliver it effectively. The Federal Reserve is working on clearer mortgage disclosures to help borrowers understand what they are getting themselves into. (“Warning! This mortgage can be dangerous to your family’s financial health.”) While I applaud the effort, I’m skeptical that it will work. If you have ever closed on a home, you know that the disclosure forms you receive are copious and dense. Should we add even more?

Fewer words, and in plainer English, might help, especially if they highlighted the truly important risks. (“In two years, your mortgage payments could double.”) But the truth is that there is much to disclose, that complicated mortgage products are, well, complicated, and that people don’t read those documents anyway.

He does go on to blame Lenders, bank regulators, and countless others. If you don’t read the New York Times, you should. Real estate is local, mortgages are national.

Senator Wayne Allard spoke at a Senate subcommittee hearing on the mortgage dilemma that faces the state of Colorado in a Denver Post article entitled Senators: Borrowers don’t understand mortgage risks.

First up the political jargon:

Consumers “must have adequate information. The information must also be clear and meaningful,” Allard said Wednesday. “Consumers should understand exactly what risks and benefits different products represent.”

Next up, what the banking regulators have to say:

Banking regulators including the Federal Reserve and the Office of the Comptroller of the Currency are working to upgrade lenders’ disclosure and loan-qualification procedures.

What Phil has to say:

The mortgage industry is full of a**holes who don’t even know how the Option Arm or Interest Only Loans work, yet sell them with reckless abandon. However, these high risk loans have allowed many Americans the opportunity to buy a home with little to no money down. Is that such a bad thing?

Borrowers receive disclosures at loan application. At closing the borrowers receive a Note, Riders, and a Truth In Lending document. These documents scream “PROCEED WITH CAUTION!” Hot tip to borrowers: START READING THESE DOCUMENTS!

A brief overview of how to make sense of a mortgage good faith estimate:

The GFE, short for Good Faith Estimate, shows the interest rate, term, loan amount, and all settlement costs on a particular loan. The items on the GFE can be divided into three major groups: Interest rate and points, fixed-dollar loan fees, and third-party charges. A dishonest loan provider can manipulate all of these figures. There is no legal liability for errors on the GFE.

On the GFE (Good Faith Estimate) you will notice some letters at the end of line 800: PFC, S, F, POC. PFC means Prepaid finance charge. These are the charges that are associated with calculating APR. S means Seller Paid. These are items that the seller will be paying at closing. The F means FHA allowable. These items are permitted by FHA. Lastly the POC stands for Paid Outside of Close. This means that these items will be paid for, generally, before close. Some common items that are paid outside of close would be appraisal fees, homeowner’s insurance premiums and homeowner’s association dues. On some GFE’s these letters may simply be filled in after the dollar amounts of each fee.

Have each mortgage professional go over the Good Faith Estimates with you. Compare the items line by line. If you notice the cost of any item on a GFE significantly higher or lower than that of the same item on other GFE’s, ask the loan officer to explain the difference. Some dishonest loan officers might “low ball” their settlement costs to gain your business.

Federal law requires lenders and brokers to provide a written good faith estimate within three days after taking an application from a borrower.

In California, the Good Faith Estimate is also called the MLDS or Mortgage Loan Disclosure Statement, when produced by a mortgage broker rather than the direct lender. The statement will itemize which costs are from the broker and which are from other parties.

It is important to keep a copy of the original GFE your are shown, to compare it to the final closing statement before you sign your loan documents.

Items checked as pre paid (PFC) finance charges will affect the final APR of your mortgage.

The 800 section of the GFE is what the lender, broker, appraisal fees are. These are the fees you will want to compare with different lenders and brokers. the 900, 1000, 1100, 1200, ampersand 1300 are all third party fees. The 1100 section are the fees charged by the title company.

Tips and advice on how to avoid mortgage fraud:

The easiest way to avoid mortgage fraud is to work with a reputable Loan Professional who is both educated and experienced. Ask for recommendations from friends and family to find out which lenders are the best in your area.

Do not over state or falsify your income on a stated loan application. By doing so you are committing loan fraud. If the loan is ever audited you can and will be held accountable for any and all false information you submit for a loan application.

There are federal and state laws governing how each party involved in a loan transaction should behave. Most of these regulations are contained in Uniform Residential Loan Application and the many disclosures you will receive in the initial stage of the loan application. Have your loan officer go over these laws with you to avoid unknowingly violating any of these statutes.

Reputable mortgage brokers charge rates and fees that do not vary based on age, gender, race, religion, or national origin. If you feel you have been discriminated against contact your state licensing authority to file a complaint.

If you ever get seriously behind in your mortgage payments and feel foreclosure looming be especially wary of companies offering assistance. Often these are scam-artists who swindle thousand’s from unknowing homeowners, sometimes leaving them penniless and homeless.

Never pay any fees without a written agreement stating exactly what services will be rendered for the fee. Also, find out up front if any part of the fee is refundable.

The most common form of mortgage fraud is occupancy fraud. An example of this is where the borrower misrepresents his intended use of the house by saying it is owner occupied when he really uses the property as a rental house. Investment loans carry a slightly higher interest rate because they are statistically more likely to end up in foreclosure. There are a few instances in which a family can legitimately have two primary residences: Ask your Loan Professional for details.

Do not hesitate to walk away from anyone suggesting you lie about anything on your loan application. Never sign any loan documents that have been left blank; these documents could be altered later.

Take the time to read each word of every document: they are important! You should be especially wary if you are ever rushed into signing a document. Pay attention to your “gut feelings” and know that no reputable broker should ever pressure you to sign before you are ready.

The TIL is a disclosure document, that goes over APR and total fees packaged into the loan. The TIL, allows the borrowers to compare “apples to apples” with different mortgage loans. APR has no effect on the payment amount just the amount of fees financed into the loan.

The Truth In Lending (TIL) will also show the payment schedule for you loan. If you have a Fixed Rate Loan the TIL will show you what your Principal and Interest payments will be for the entire loan. If you have an Adjustable Rate Mortgage (ARM) the TIL will show what the payments are during any fixed period and an estimate of what may happen during the adjustable period. The TIL also shows the total amount of all payments on the loan. It is common for this number to be two or three times the original amount of your loan.

One of the information on the Truth-in-Lending disclosure form that draws the most attention is the Annual Percentage Rate (APR). The APR is almost always higher than the interest rate the loan officer quotes at application. One need not be alarmed. This is due to the fact that the APR is calculated by adding other fees that are associated with the mortgage process, such as underwriting fee and processing fee, to the qualifying interest rate. The APR is not used for calculation of the monthly payments. It is only meant to show the total cost of the loan, with the applicable fees included.

The APR is what you should use to compare mortgages if you are shopping. This will take into consideration any fees and points that are being charged. If you compare 2 lenders on the same loan amount and interest rate, the lower APR will tell you which loan you are being charged less fees on.

The APR on the Truth in Lending statement can be a bit misleading for customers as the underlying formula used to calculate Annual Percentage Rate on mortgages incorporates many fees which are not amortized into the loan. Please discuss this point with your loan officer or mortgage banker.

Depending on which state you live in, your mortgage professional may be required to provide you with a TIL Disclosure within three business days from the day you filled out an application for a mortgage.

The TIL is a document that is better used for comparing loan programs versus just comparing interest rates because you are taking into consideration all costs of acquiring the loan. One thing to look at closely is what items are checked marked on the GFE to be included in the Annual Percentage Rate on the TIL. The fees which need to be included in the APR are outlined by the federal government but that doesn’t mean that every broker is using the guidelines properly.

Always check your TIL for whether or not you have a pre-payment penalty.

Mortgage lenders are required to give you a truth in lending (TIL) statement containing information on the annual percentage rate, the finance charge, the amount financed, and the total payments required.

The Lending process starts with interest from the borrower in either buying a home or refinancing. When thinking about buying a home many people start to look for houses first. The first step should always be to consult with a mortgage professional. When talking with a mortgage broker you will need to disclose information about credit, income employment, and housing history. These factors all contribute to the ability to qualify for a loan. The mortgage broker will often get a full approval before issuing you a pre-approval letter. This will need to be provided to any real estate agents involved with the purchase of a home. In either a refinance or a purchase the remainder of the process is relatively the same. Often as a borrower you will shop for the best rate once you have gotten pre-approved. The best way to do this is to get your credit scores from the first broker so you can provide it to subsequent brokers. This will help limit the number of inquiries on your credit. Make sure you are comparing apples to apples; get the type of loan, estimated payment (just principal and interest), the rate, the estimated closing costs, and the APR. Also be aware that interest rates vary much like any other financial market, rates can go up or down from day to day, so try and make all your calls on one day. Once you have chosen a broker you will be required to sign an application package. This will consist of the application, disclosures, good faith estimate and several other documents. At this point the broker will also require copies of documentation: pay stubs, W-2s or 1099s, bank statements, current mortgage statements, home owner’s insurance statements, sales contract, etc. The type of documentation requested will depend on the type of loan and if it is a purchase or a refinance. In the case of a refinance there is not much else for the borrower to do, in a purchase you will need to start to contact an insurance agent and work with your realtor for the home and pest inspections, etc. Now is when the mortgage broker starts to put your loan together for the lender. The broker orders the title work, and the appraisal, and starts to verify the information and documentation provided. The broker may need to contact your bank, employer, landlord, or other creditors to get written confirmation of the information you provided on the application. Once the title work and appraisal are complete, which may take a week or two, the broker compiles all the information and organizes it into the specific format for submission to the lender that has been chosen for your loan. The lender reviews the submission in a process called underwriting. Once the lender has verified all the information and documentation submitted they may ask for additional documentation or information. If they need anything else they will send the broker a list of conditions or stipulations. If nothing else is needed they will issue a clear to close and the broker will schedule the closing with the title company, borrower and the real estate agents and seller in the case of a purchase.

A Quick Summary of the Loan Process:-Find the mortgage that best fits your needs.-Fax, mail, or deliver the paper work that a loan officer has requested.-Sign and return the loan papers.-Get the home appraised.-Loan goes to underwriting and additional documents may be requested.-The loan is approved and closed.

The length of time that the lending process will take can vary. Factors that go into the amount of time it takes include who the lender is, how busy the lender’s underwriting department is at the time your file is submitted, availability of the appraiser and other things. Delays by the borrower in getting needed documents to the broker or lender can also cause the loan process to take longer.

You will also need to provide the name of your insurance agent so that your policy will reflect accurate mortgagee clause information.

The Lending process can be nerve racking to some borrowers. A competent loan officer will keep you informed so you know what stage the lending process is in. Borrowers should be prepared for bumps along the way. These bumps happen most often because everyone involved in the process has their own time schedule including the borrower. A good loan officer will explain this to you and minimizes these bumps in the process.

One of the most important features of being involved in the lending process is not delaying. There are so many moving parts in the process that any one person’s delay can cause the time to funding greatly prolonged.

Always be upfront with your loan officer and do not withhold information from him. Your loan officer will look out for your best interest, and the best way to do that is by having all the facts up front.

Part of the lending process is locking the interest rate. You can lock rate any time from the initial application to 3 days before closing. Depending on whether it is a purchase or refinance, most banks allow you to lock for 15, 30, 60, 90 days, or even longer. The longer an interest rate is lock for, the higher the interest will be. Therefore, you should always discuss with your loan officer about when and for how long should you lock your interest rate.

The documentation requested of you, during the loan process, from your mortgage professional will vary depending on the loan you are attempting to get. For example if you are doing a stated income/stated asset loan, then you will not be required to provide tax returns, bank statements, or other things of this nature.

It is a good idea to go over with your mortgage broker the steps that he/she will have in their personal lending process as the time schedules and procedures may change from lender to lender.

If you have any questions about what point you are at in the process, you can always call your loan officer and ask. They are there to help you, answer all your questions, and put your mind at ease.

Ratios used to determine whether a borrower can qualify for a mortgage. They are based on a borrowers housing expense as a percentage of income and his total debt as a percentage of income.

Debt to Income Ratio or DTI can be improved by paying down liabilities with high monthly payments compared to the balance on the account. In some cases some of your debts can be excluded from the calculation of your DTI. For example if you have an auto loan and you have less than 10 payments left you can exclude this monthly payment from the calculation thus reducing your DTI.

There are several loan types that can help you if you have a high debt ratio with good credit. One is called a No Ratio loan: The Borrower’s source of income is verified, but the income amount is neither disclosed nor verified. The second type of loan is called No Income No Asset: The Borrower’s employment, income, or assets are not disclosed or verified. A third type of loan usually associated with FHA is the Streamline loan: No income documentation or disclosure is required.

When evaluating your Debt-to-Income ratio, the Back DTI plays a more important role than the Front DTI. The Front DTI is calculated by dividing the proposed housing expenses, also referred to as PITI, by the borrowers’ total gross income. Housing expenses or PITI is defined as the inevitable expenses incurred as a direct result of owning the subject property, such as mortgage payment, property tax, hazard insurance, (hence the acronym for Principal, Interest, Taxes, and Insurance), homeowner association dues, private mortgage insurance, etc. The Back DTI is calculated by dividing the borrowers’ total monthly obligations by the total gross monthly income. Total monthly obligations includes not only the housing expenses, but also all installment debt payments such as leased/financed vehicle and credit card payments. Most lender banks would allow a borrower’s Front DTI ratio to go above 45% if the borrower has no other obligations.

Qualifying ratios also called your debit to income ratios or debt load consist of your total verifiable gross monthly income divided by your new proposed payment, all your other monthly debits such as minimum payments on charge cards, auto loan or lease payments, student loans, consumer loans, child support and alimony.

A debt to income ratio is simply a way of determining how much money is available for your monthly mortgage payment after all your other recurring debt obligations are met. Qualifying ratios are guidelines, an excellent credit history can help you qualify for a mortgage loan even if your debt load is over and above the limit. Typically conventional loans have a qualifying ratio of 28/36. Usually an FHA loan will allow for a higher debt load, reflected in a higher (29/41) qualifying ratio. The first number in a qualifying ratio is the maximum percentage of your gross monthly income that can be applied to housing (including loan principal and interest, private mortgage insurance, hazard insurance, property taxes and homeowner’s association dues). The second number is the maximum percentage of your gross monthly income that can be applied to housing expenses and recurring debt. Recurring debt includes things like car loans, child support and monthly credit card payments.

Not all monthly debts/liabilities have to be taken into consideration when determining the amount of a borrower’s recurring monthly debt obligations. Such liabilities are known as contingent liabilities. Some of the most common that may be exempt under certain circumstances are co-signed loans, court-ordered assignment of debt, and loans secured by financial assets

Many mortgage lenders have thrown those old ratios out the window, approving household debt ratios in excess of 50% of income. If over 50% of your income is going to debt service you will be forced to either live a very shallow life with little or no funds for saving, investment or enjoyment, or, worse, are headed for a financial disaster.

Qualifying ratios are only a rough guidelines and underwriters consider many variables in their analysis. Many times, borrowers fall outside the guidelines, but have strong compensating factors that reflect low credit risk. Some compensating factors are history of savings, long-term job stability, a substantial down payment or excellent credit history will influence the decision to approve or deny a particular loan.

There are loan programs such as No Ratio and No Doc, that will basically avoid the debt ratio calculation for you. The only one that can make this decision, is the borrower. They are the person that will have to make the payments, with or without the calculation.

Automated underwriting can also bypass the typical qualifying ratios. Automated underwriting takes into consideration credit and assets and can give approvals for debt ratios or 50,60,or 70% or more.

The front-end ratio, or front ratio, compares your monthly pre-tax income with your house payment. The other ratio that lenders look at is the back-end ratio, or back ratio. This calculates how much of your pre-tax income will payments— such as auto loans, credit cards, go toward your house payment, plus all of your other monthly debt etc. It can be useful to figure out these numbers yourself and see if the house payment you have in mind may actually cause you undue financial risk.

Many times on a refinance loan the way to lower your ratios is to pay off debt at the time of the refinance, this reduces your monthly payments and in turn, your ratios.

Some lenders are stricter about qualifying ratios than others. Just being within the lender’s debt to income ratio limits is only one aspect of qualifying for a home loan. Most lenders will consider the overall financial picture. If everything looks good, a lender may allow you to carry more debt. When shopping for a new home, it is always wise to be pre-approved, so that you’ll know specifically what price range and loan payment fits your budget. Remember to be Pre-Approved, Pre-Qualified is just not enough.

How much house can you afford? That’s what lenders want to know when making their decisions about your mortgage. If you are having trouble qualifying for a loan program because of your ratios, contact us and ask about extending the term or discussing a temporary buy down to help you qualify.

Qualifying ratios can prevent purchasers from obtaining a home however there is an opportunity to use a 40 year mortgage to reduce the payment by extending the term and therefore create a more favorable qualifying ratio calculation.

Many lenders allow debt to income ratios to go as high as 55%. Meaning the new mortgage payments plus all existing monthly liabilities can be as high as 55% of the borrowers total gross income.

On conforming loans, you can still usually get an approval even if your debt ratios are higher than the set standards. Low loan to value ratios and lots of reserves can offset higher debt to income ratios.

Although your ratios may be high you can still qualify for alternative programs with higher ratios. For the most part a lender will look at what’s reported on your credit report to determine your ratios. The best thing for you to do is consult a Professional Mortgage Broker and have them look at your credit to see where your ratios are and what you qualify for. And remember that safe secure online forms from a Mortgage Website is the fastest way to achieve this.

A loan officer is a mortgage professional who assists with originating a mortgage loan for a borrower. A loan officer will help a borrower to identify their needs, select a loan program, complete the application process, offer advice and answer any questions a borrower may have.

Loan officers may work for either a bank or a broker. Both have similar jobs, but their products are very different. Loan officers who work for banks only have access to the loan programs that the bank offers, while loan officers who work for brokers have access to all of the loan programs from many different lenders. In fact, many brokers work with hundreds of lenders nationwide.

Many loan officers specialize in specific types of transactions. Make sure you either select a loan officer who specializes in helping clients with transactions such as yours; or a loan officer who at least does not specialize in transaction types not related to your loan type.

A loan officer works with borrowers to help them choose the right loan program. The loan officer then helps the buyer complete loan application and required disclosures to apply for their particular loan program. The loan officer also acts as the liaison for the lender and buyer during the process to help get the loan closed in a timely manner.

A good loan officer not only is knowledgeable, but is professional. They return phone calls promptly, and do the research necessary to ensure the borrower gets all their questions answered correctly. An un-researched answer could cause serious delays later on, or worse cause the loan application to be denied altogether. A good loan officer knows how to preempt future problems and prepare for it.

When looking for a loan officer to handle your mortgage transaction you should look for a loan officer that is someone you feel comfortable with and can trust, is professional, is knowledgeable, and is reliable. A mortgage is one of the biggest investments in most people’s lives and you should feel comfortable and secure with the person you decide to work with.

When interviewing a loan officer who will assist you in a major financial transaction choose one who is knowledgeable, professional, organized, efficient and who gives you a sense of trust and comfort.

One thing that the Loan Officer does not do is decide what documentation that you will need or what conditions your loan approval are based upon. On rare occasions, the Loan Officer may negotiate with the underwriter if there are conditions that seem unfair or you are unable to meet. Generally speaking though, the underwriter will decide what conditions apply and the Loan Officer and you as the borrower must comply in order to complete the loan process.

A mortgage broker has many more programs than loan officer at a bank. Brokers are able to offer more products that will help you get the loan you want to achieve your financial goals. Brokers are especially good when it comes to buying investment properties because of they offer more programs that can help the property cash flow.

With the recent advance technology development in the mortgage industry, loan officers can now get a loan approval from banks in a matter of minutes, making the role loan officers play ever more important to homebuyers. A knowledgeable loan officer is the first person in the loan process who can tell whether a loan application is likely to be approved or declined, even before the application is submitted to a bank underwriter. The loan officer can then advise on how to improve the likelihood of getting the application approved, before it is declined by lenders.

A loan officer normally works directly for a broker, whom is licensed. In some States the LO is also required to be licensed. You should check with your LO to ensure he is licensed if required.

Loan Officers are a valuable resource, and have your best interests in mind.

Other sites: Mortgage Broker | 1003 The Loan Application | Protect Yourself from the Real Estate Bubble | Negative Amortization | MIP | Selling your home with a real estate agent | Delinquency | Quick Closing | Fixed-rate mortgage | Stated Income Loan | Tips for lowering your homeowners insurance| Pay Option Arm Calculator

The very first step in the loan process is to get pre-qualified. This is very easy to do and can be done from the comfort of your own home. In the pre-qualification your mortgage broker will pull credit and ask questions pertaining to your income and mortgage/rental history. With this information the mortgage broker will be able to give you an idea of the programs that might be available for your situation and credit rating.

While the bank underwriter examines the loan application package, your mortgage broker would order title search on the subject home, if this has not already been done at an earlier stage. The title search process typically takes several days. When the title abstract becomes available, your mortgage broker reviews it to ensure the property is free of title defects and unexpected liens, then forwards the title report to the lending bank’s closing agent. In states where the title agent is also the closing agent, this step is eliminated. With a clean title report, the title company issues a title insurance policy at settlement.

In certain states, an attorney’s statement of title may supersede that of a title company.

Once you have signed all of the required documents and provided the necessary income ampersand asset documentation(if needed) your mortgage broker will submit this info to the loan underwriter. At this time an appraisal may be done on the property being financed.

Be patient, sometimes someone loan will go really smooth. Other times it takes a little longer. The key is that sometimes it does take time.

Once the underwriter has looked at all of the paperwork sent in with the initial package, he or she will issue what is called a conditional approval. The loan officer or loan processor will contact the borrower, borrower’s employer or bank to acquire any additional documentation requested by the underwriter. This paperwork will then be sent back to the underwriter for him or her to sign off on the conditions.

It usually takes a lender between 1-6 weeks to complete the evaluation of your application. It’s not unusual for the mortgage lender to ask for more information once the application has been submitted. The sooner you can provide the information, the faster your application will be processed. Once all the information has been verified, the lender will call you to let you know the outcome of your application. If the loan is approved, a closing date is set up and the lender will review the closing process with you. And after closing, you’ll be able to move into your new home.

When you go to your closing always remember a state issued photo ID.

After deciding on the loan program that’s right for you, complete the Uniform Residential Loan Application with the help of your loan officer. To complete the loan package, you will be asked to sign all the necessary federal and state disclosure forms, and to supply all the income and asset supporting documents, such as pay-stubs and bank statements, if they pertain to your chosen loan type.

The GFE is a list of all the closing cost that are involved in the loan; such as discount points, processing fees, underwriting fees, title fees, taxes and insurance, and any other fee that might be associated with the loan. 800 section of fees- charges from the broker, 900 section –charges required by the lender(pre paid interest, mortgage insurance, etc) 1000 section- reserves required by the lender(taxes and insurance), 1100 section- fees charged by the title company(closing fee, title search, title insurance, etc) 1200 section- fees required by the local government( recording of the loan, etc)

Borrowers must understand that there is no requirement in the law that the Good Faith Estimate be accurate within any certain percentage to the fees that are actually charged at closing. It is only required to be issued “In Good Faith”, a somewhat arbitrary standard that is difficult to prove one way or another. Working with an experienced, licensed and knowledgeable mortgage professional rather than just whoever purports to have the lowest rate will likely increase a borrowers chances of having very similar fees at closing to those shown on the GFE.

There are several reasons why the GFE may change from when it is originally disclosed to what is represented at closing. If the loan amount changes this will affect any points on the loan as well as some of the title charges. If the date of closing changes this will change the per diem interest. Estimates may be included for the taxes and insurance, when the actual numbers are determined this can change the GFE. If the broker needs to change lenders for one reason or another this may change some of the fees, as each lender has different fees that they charge. If the rate changes for some reason (borrower’s credit drops and they no longer qualify) this can affect the closing costs. There are many acceptable reasons for the GFE to be inaccurate and have some small changes by the time you get to closing. If the changes are major make sure you have your broker walk you through the original and final GFE and explain any discrepancies. Don’t be afraid to ask questions. There are some changes that may not be acceptable to you such as additional points. If this is the case try to negotiate with your broker, don’t be afraid to walk away. In most cases you are entitled to a copy of the final HUD-1 at least 24 hours prior to closing.

The Good Faith Estimate along with the Truth-in-Lending is required by law to be given to borrower within 3 days of applying for a mortgage. They need to be signed and dated by borrower to ensure compliance.

The best way to determine which lender actually offers you the best mortgage deal is to carefully examine each lender’s closing cost estimate. Be aware however, that not all closing cost estimates are alike. In an attempt to make themselves more attractive to customers, some lender’s closing cost estimates leave out significant fees. Generally speaking, a Good Faith Estimate should include the following: the loan origination or broker fee; points; prepaid homeowner’s insurance; an appraisal fee; title search and insurance; tax adjustments; and mortgage insurance if you are putting less than 20% down.

A Good Faith Estimate is just that, an estimate and subject to change. In fact, final closing costs cannot be estimated until closing when the final HUD-1 settlement document is presented.

People often believe that the Good Faith Estimate is the best way to compare loans. In fact, that is not true. The Truth-in-Lending disclosure (TIL), which also takes into account your APR, is a more accurate way to compare loans, in terms of their cost to you.

The fees listed on the GFE are estimates only. Depending on many factors, your GFE may change during the loan process, and for that reason it cannot be considered a commitment to lend.

The charges can vary on the Good Faith Estimate. Escrow accounts will vary depending on how many months need to be set-up, when you close will affect the prepaid interest, different lenders will have different fees, and some general fees are added which may not be needed such as a survey or a pest inspection.

The Good Faith Estimate is only an estimate or range of charges. For example, the lender may not know the costs for a settlement agent that you choose, or the exact amount that will be collected for an escrow account for taxes and insurance.

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