Estimates of Closing Costs and Fees
At various steps in your loan application process, you are entitled to receive estimates of the costs and fees associated with obtaining a mortgage and completing settlement.
The "Good Faith Estimate"
With such a long list of potential charges at closing, it is important to know what to expect. The Real Estate Settlement Procedures Act (RESPA) requires your mortgage lender to give you a "good faith estimate" of all your closing costs within 3 business days of submitting your application for a loan, whether you are purchasing or refinancing the home. This is a good faith estimate, and the actual expenses at closing may be somewhat different. If you are purchasing the home, you will also get an information booklet, Buying Your Home: Settlement Costs and Helpful Information.
Truth In Lending Information
For home purchases, the lender is required, under the Truth in Lending Act, to provide a statement containing "good faith estimates" of the costs of the loan within 3 business days of submitting your application. This estimate will include your total finance charge and the annual percentage rate (APR). The APR expresses the cost of your loan as an annual rate. This rate is likely to be higher than the stated contract interest rate on your mortgage because it takes into account discount points, mortgage insurance, and certain other fees that add to the cost of your loan. When refinancing your mortgage, you will receive the truth in lending disclosures before you settle.
The "HUD-1" Statement
When you purchase a home or refinance your mortgage, the Real
Estate Settlement Procedures Act also requires the lender to give
you a copy of the HUD-1 or HUD-1A Settlement Statement one day
before you go to settlement, if you request it. This final statement
of settlement costs will show all the fees and charges you will
be expected to pay at closing. For a sample HUD-1, see: Blank
HUD-1 Settlement Statement. For descriptions of various sections,
Section J (lines 100-303) and HUD-1
Section L (lines 700-1400).
Fees Paid Outside of Settlement
Some fees may be listed on the HUD-1 and marked as "Paid Outside of Closing" (or "POC"). You will pay some of these fees, such as for credit reports and appraisals, before settlement. Other fees, such as those to a mortgage broker, you will pay at settlement.
The information provided in this website is
not legal advice and should not be interpreted as legal advice.
This website is intended to provide a basic understanding of this
information in summary form. This information may not be comprehensive,
is subject to change, and may not apply to all individual circumstances.
Any information received here should be confirmed with the appropriate
government agencies or with an attorney, particularly as it relates
to your individual circumstances. Your use of this website indicates
your agreement to be bound by our Terms
© Copyright 2005-2013 MortgagesFinancingandCredit.org