Click to view new Good Faith Estimate

Along with the New Year, 2010 has brought the introduction of a brand new Good Faith Estimate  for shoppers of Massachusetts mortgage rates. As part of long awaited RESPA reform, HUD has mandated the use of a standard Good Faith Estimate intended to simplify the disclosure of loan fees and Massachusetts closing costs to allow consumers to shop around for the best deal.

In my opinion, the new Good Faith Estimate is a mixed bag. Some will like it while others won’t, but no matter what side of the fence you sit on, there’s no arguing that it will definitely take some time to get used to. To help those of you currently in the market for a Massachusetts mortgage, here’s my guide to the Good Faith Estimate explained.

Benefits of New Good Faith Estimate

• Simplifies shopping for a mortgage by clearly disclosing mortgage rate and terms as well as consolidating  individual closing cost fees into categories
• Prevents “surprises” at closing by establishing tolerance ranges for each closing cost category
• Origination charge quoted on Good Faith Estimate cannot change at closing (zero tolerance)
• Fees quoted for “All Other Settlement Services” must be available for a minimum of 10 days to allow you to shop for a mortgage
• Same Good Faith Estimate must be used by every Massachusetts mortgage broker and lender

Disadvantages of New Good Faith Estimate

• Total estimated funds needed for closing is not included on the new Good Faith Estimate so you no longer will know how much cash will be needed for closing
• New Good Faith Estimate is claimed by HUD to simplify and make things easier for you to understand yet the new version expands to 3 pages from only 1 page previously
• Mortgage payment on new Good Faith Estimate no longer shows total monthly payment (escrows for property taxes and homeowners insurance no longer included)
• Seller credits towards closing closing costs for a home purchase are not deducted so the total estimated settlement charges shown will be actually be more than what you need for closing
• No signature line is included on the new Good Faith Estimate which could prove troublesome to prove that it was the one provided by the mortgage company in case of dispute

This brief introduction should give you a general sense as to what the new Good Faith Estimate brings. Over the coming weeks, I invite you to join me for an in-depth look at the newly created closing cost categories listed below.

Adjusted Origination Charges

1. Origination charge
2. Credit or charge (points) for specific interest rate chosen

Charges for All Other Settlement Services

3. Required services that we select
4. Title services and lender’s title insurance
5. Owner’s title insurance
6. Required services that you can shop for
7. Government recording charges
8. Transfer taxes
9. Initial deposit for your escrow account
10. Daily interest charges
11. Homeowner’s insurance

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