The economic mood these days has everyone saving money, especially when purchasing a home, every penny is counted.  In that direction, effective January 1, 2010, the cost of purchasing a residential mortgage or the transaction of refinancing will be shown by the new standardized Good Faith Estimate and the HUD-1 Settlement Statement. These revised forms will now allow the consumer to research the costs of closing before they decide on a property to buy. When choosing a mortgage, consumers will be able to shop and compare fees from different lenders with both the new GFE and the HUD-1 Settlement Statement. 

To give the consumers more disclosure, new guidelines of the HUD-1 will be a blessing. The new HUD-1 Settlement Statement will now have a chart attached that shows the actual fees being charged allowing consumers to compare them directly with the GFE. This makes it very easy for home buyers to easily identify major differences in what they thought they would be paying in closing costs and what they actually will be paying in closing costs.  The new form also allows the consumer to see the fees that should not increase more than 10% versus those fees that may fluctuate. These fees can affect the borrower’s monthly payment and by being able to see this information before closing, the borrower will have a better idea of his closing expenses and monthly mortgage responsibilities. Best of all, the borrower will be able to question any discrepancy before closing as well and hopefully avoid financial surprises.

In addition to breaking down the fees and giving the borrower more ability to choose things that affect their closing dollars and monthly payment, the revised HUD-1 Settlement Statement will also give the consumer a clearer picture of the following items:

What’s the term of the loan?
Is the interest rate fixed or can it change?
Is there a pre-payment penalty to refinance at a later date?
Is there a balloon payment?

Giving borrowers more information opens the door to smarter home buying. Unfortunately, most home buyers and borrowers will not receive their HUD-1 statement until closing is close at hand, no less than one day prior to closing to be exact, but at least this tool will be available to ensure buyers that they are making a smart buying decision.  Home buyers shouldn’t be shy about it and definitely ask questions about any increases, decreases or overall changes before signing.