HUD Releases Updated Mandatory Settlement Cost Booklet

• January 7th 2010

by Tim Brown

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The U.S. Department of Housing and Urban Development (HUD) has released a settlement cost booklet, Shopping for Your Home Loan, that provides a comprehensive guide to the home buying process, detailing the various stages including whether you are ready to buy a home, and determining how much you can afford to spend.

The booklet also explains how interest rates, points, fees, and pre-payment penalties can affect your mortgage payment, as well as how to deal with your loan and loan servicing problems after settlement, steps you can take to avoid foreclosure, and issues to consider before refinancing or taking out a home equity loan.

Perhaps one of the more useful features is a surprisingly detailed breakdown of the Good Faith Estimate (GFE), that long, confusing, and often misinterpreted document that estimates a home buyer’s settlement charges. The booklet goes line by line, explaining exactly what each item means. There aren’t many reliable, easily accessible sources out there that explain all of these charges and fees, so this section is particularly useful to first-time homebuyers. Many borrowers rely on their real estate agent and loan officer to explain these fees to them, but even after their guidance, can be left with a number of unanswered questions on exactly how much they will be paying.

As part of the Real Estate Settlement Procedures Act (RESPA), lenders are required to give this booklet to consumers within three days of applying for a mortgage. (RESPA was enacted in 1974 to regulate closing cost procedures, in turn helping to protect consumers from unfair and predatory lending practices.) The recently-updated booklet includes a new set of standards that went into effect at the beginning of the year. Under the new rules, all borrowers must now be provided with a standardized Good Faith Estimate. HUD estimates that by improving upfront disclosures on the GFE, and limiting the amount estimated charges can change, consumers will save nearly $700 in total closing costs.

A PDF copy of the booklet can be found here.

This article originally published at https://dc.urbanturf.com/articles/blog/hud_releases_updated_mandatory_settlement_cost_booklet/1657.