Good Faith Estimate of Settlement Costs & Other RESPA Disclosures
The Real Estate Settlement Procedures Act, RESPA, was enacted to help protect consumers when they buy and sell real estate, and to teach them to be better shoppers.
The disclosures RESPA requires lenders and others to give you estimates that make it easier to compare loans and services. Some disclosures outline typical costs and servicing policies, others force settlement participants to disclose affiliations.
Good Faith Estimate of Settlement Costs
When you apply for a loan, the lender or mortgage broker is required to give you a Good Faith Estimate of the loan-related expenses that will be due at closing. The estimate must be mailed or given to you within three days of your loan application unless the lender turns down your application during that period.
The amounts on the Good Faith Estimate are just that--estimates, not guarantees of your actual closing costs. Remember that some closing costs will vary depending on the home you buy, and are not directly related to the loan, such as inspection fees, insurance policies, surveys and other expenses.
Keep your Good Faith Estimate and compare it to your actual closing costs. Ask your lender to explain any changes.
Servicing Disclosure Statement
RESPA requires the lender or mortgage broker to tell you in writing whether or not someone else will service your loan (collect payments) after closing.
Affiliated Business Arrangements
This disclosure is required if your lender, real estate agent, or other person involved with your transaction refers you to another individual or business that is owned or controlled by the same parent company.
The form will include a reminder that you are not required to use the suggested individual for the service. Exceptions to that rule will be noted on the disclosure.
HUD-1 Settlement Statement
The HUD-1 is a form used by the settlement agent (also called the closing agent) to itemize all charges imposed upon a borrower and seller for a real estate transaction. It gives each party a complete list of their incoming and outgoing funds.
RESPA statutes require that the HUD-1 be used as the standard real estate settlement form in all transactions in the United States which involve federally related mortgage loans...
Escrow Account Operation & Disclosures
Your lender will likely require that you allow it to maintain an escrow account for you so that it can pay your property taxes and hazard insurance when those expenses become due the following year.
You'll begin funding the escrow account at closing and will build its balance with payments included in your monthly mortgage payments. The lender will probably require that you have a cushion in the account--an amount slightly more than the previous year's bills--in order to cover an increase in expenses.
The company servicing your loan must give you an initial escrow account statement within 45 days of closing. The statement should outline expected payments into and out of the account for the coming year.
The escrow account should be reviewed annually, and you should receive a new disclosure each year showing that year's activity and any payment adjustments necessary for the coming year.
For more real estate selling ideas, contact Jonathan Bagg. Watson Realty Corp. at 904.599.2028. Visit his website at www.beachbagg.com