You have determined what you can afford, shopped for the best loan for your needs, and found the right house. After all the hard work, it is time to go to settlement, but don’t forget to bring your GFE to compare with the charges listed on the HUD-1 Settlement Statement (HUD-1). It is a good idea to review your HUD-1 before your settlement. Let your settlement agent and lender from the local Temecula branch of Choice Lending Corp know that you want to receive a completed HUD-1 at least one day prior to your settlement.
Your settlement may be conducted by your lender or your title insurance company, an escrow company, your attorney or the seller’s attorney. Regardless of who performs the settlement, there will be many important documents that you will need to sign. Make sure you carefully read and understand all the documents before you sign them. Do not be afraid to ask the lender any questions you have about your loan documents.
The HUD-1 is a form that lists all charges and credits to the borrower and seller in a transaction. You have the right under RESPA to inspect the HUD-1 before settlement occurs. When you receive a copy of the HUD-1, compare it to your GFE (Good Faith Estimate). Ask the lender questions about any changes in fees between your GFE and the HUD-1. Your lender must reimburse you if a closing cost tolerance was violated.
Revisiting Your Good Faith Estimate or GFE
The GFE is a three-page form designed to encourage you to shop for a mortgage loan and settlement services so you can determine which mortgage is best for you. It shows the loan terms and the settlement charges you will pay if you decide to go forward with the loan process and are approved for the loan. It explains which charges can change before your settlement and which charges must remain the same. It contains a shopping chart allowing you to compare multiple mortgage loans and settlement costs, making it easier for you to shop for the best loan. The GFE may be provided by a mortgage broker or the lender.
Your HUD-1 or Settlement Statement
The first page of your settlement statement will review the borrower’s transactions which will include the contracted sales price of the house and any adjustments that will be made for items paid in advance, or items left unpaid by the seller. These items can include taxes and assessment fees.
The fees owed to the real estate company and brokerage fees come next. This shows the commissions paid to the real estate agents for the property transaction. A series of line items follows itemizing a variety of items payable in connection with the loan such as appraisal, credit reports, tax services, flood certificate, and insurance services.
Comparing your HUD-1 and GFE
The third page of the HUD-1 is made up of two sections: the Comparison Chart and the Loan Terms. The Comparison Chart will help you compare the charges disclosed on your GFE and the actual charges listed on page 2 of the HUD-1. The Loan Terms section can assure you that the loan you applied for is the loan you received at settlement. This section should compare with the “Summary of Your Loan” on page 1 of the GFE.
There are three categories in the Comparison Chart: charges that could not increase at settlement, charges that in total could not increase more than 10 percent and charges that could change. Compare the charges listed in the GFE column with the charges in the HUD-1 column. If the charges that cannot increase have increased or the total of the charges that cannot increase more than 10 percent have exceeded the 10 percent increase limit, the lender must reimburse you at settlement or within thirty (30) days after settlement.
The last section on the HUD-1 (next page) clearly sets forth the terms of your loan, including the loan amount, your interest rate and your monthly payments. It will also disclose the monthly escrow payment account information. It lets you know whether your interest rate, your loan balance, or your monthly payments can increase and whether your loan has a prepayment penalty or a balloon payment.
Look at this information carefully and make sure you are getting the loan and the terms that were set forth in your GFE. If the loan terms do not match the loan terms on your GFE or if you have questions, contact your lender before signing any documents.
If you are ready to talk about what you can afford and what type of loans will fit your needs Choice Lending Corp of Temecula can help you explore all the options. Call a lender or mortgage broker today at (877) 777-1203.