One of the things that always irritated me about mortgages and loans is the Good Faith Estimate. I would personally like to see it changed to the Good Faith Promise because I have never had a loan close where the estimate was even close. To be fair about it, I've only done 16 loans or refinances so maybe 0 for 16 is the norm (yeah right). As far as I'm concerned, it's a bunch of BS. Anyway, since these estimates are a part of life, we should know how to read them.
Inspired by a recent topic on the Single Ma blog, I searched for good resources that would explain more. I decided to list a few here after seeing that the 90% of the sites discussing this topic were advertisement laden and pretty annoying.
The first resource I want to point to is that one that Single Ma listed. I like this because there is not one single ad on the site and you can get in, read, and get out with no mess. The resource is Zions Mortgage Line, here is a sample showing it's not full of jargon that you don't understand:
903 Hazard Insurance Premiums: 903 A lender will require you to insure the property you are buying, since the property is the collateral for the loan. At the time of closing you must pay the entire first year's premium. If you already have hazard insurance, contact your insurance company and ask them for a copy of your insurance policy to show the lender. We are estimating the amount of the coverage, and every borrower is free to choose the insurance provider. We will replace this figure with your actual amount once we know what the exact amount will be.
Safeborrowing.com - I actually like one part of this site. When you review your good faith estimate, you will know exactly what the 800s and 1100s are. Here is the part I like:
Fees in Lines 800s are the most important for shopping. They may be very different from lender to lender both in amount and in what the fees are called. Because of this, you should add up all the fees in Lines 800s and compare the total fees in this group with another lender’s or broker’s fees to decide which mortgage lender/broker is estimating the lowest total fees.
Fees in Lines 1100s actually are charged by the closing agent (that is the company/attorney that will assist in loan closing). These fees may be negotiable either with the lender, broker or closing agent. In addition, in some states, you may choose the closing agent and you may be able to shop around for a closing agent that will better serve your interests and charge less.
Financing 21: This resource is pretty solid too. First they provide a pdf sample of a Good Faith Estimate. Now, the same site goes onto explain what all of the line items are.
1109 - Title Insurance Lender's Coverage
Protects the lender against loss due to problems or defects in connection with the title. The face amount of coverage is usually written for the amount of the mortgage loan and covers losses due to defects for problems not identified by title search and examination.
1110 - Owner's Title Insurance
This fee covers the part of the title insurance policy that protects the owner against loss due to disputes over ownership of the property. The owner's policy is not necessary for a refinance transaction as the existing policy remains in full force and effect, if obtained when you purchased your house, for as long as the owner owns the property.
Like the title of this post says, get educated a little before putting all of your confidence (and money) in the hands of someone else.
I want to be sure to mention that we found the Single Ma blog after first reading Mapgirl. We are feed subscribers to Mapgirl and if you are looking for a good daily personal finance blog, you won't go wrong checking her out.
