I’ve written lately about changes in lending regulations, which apply not just to the Lake Norman area real estate market, but everywhere in the USA. Truth in Lending laws are federally enforced. They are established to protect borrowers from predatory lending practices like excessive fees or interest rates. The way the regulations protect you is by requiring full disclosure before signing the papers.
The way this is accomplished is through a Good Faith Estimate, or GFE, which lets a borrower know up front what costs they will incur when they do business with the particular lender. The GFE details all the estimated costs to obtain financing. For it to be effective, however, the borrower must take the time to read and understand what it says. It is just what it says, an estimate. As a consumer you have the right to shop for a loan just as you would shop for anything else. You may compare prices and interest rates from different lenders. The law requires that you be provided the GFE when you apply. It does not require that the lender collects an application fee first.
I have worked with clients in the past that have come close to being victims of excessive charges when they applied for a mortgage. Thankfully for them, I generally ask them if they would like me to look at their GFE, or if they have any questions about it. I have saved clients from making some costly decisions, which I consider to be part of my fiduciary responsibility to them.
Two things to remember when you look for a mortgage:
1. You are entitled to shop and to see what lenders want to charge. You will not damage your credit score if you apply at more than one institution, provided it all happens in a short period of time.
2. The preparation of a GFE by a financial institution does not obligate you to any fees or to signing on the dotted line.
If you are considering applying for a mortgage, and aren’t comfortable reading a Good Faith Estimate, ask your Realtor to look it over. He or she should be able to offer guidance. Do not make the assumption that all lenders charge the same or that you don’t have any right or responsibility to get clarity on the biggest expenditure of your life.