Thursday, March 20, 2008

Subprime Crisis Nightmares and Mortgage Problems

I have seen it all myself and this article attests to the trapping and lies that have befallen many in the current real estate crisis.

There are a couple of things that you should always keep in mind when shopping around for a mortgage whether it is a refinance (refi) or purchasing a new home.

One of the most important things to ask for when shopping for a refi or when purchasing is a GFE - or good faith estimate. There is a Truth-in-Lending Act ("TILA") statement required for closed-end, fixed-rate residential mortgages under the Truth in Lending Act, and the Good Faith Estimate of Settlement Costs ("GFE") required under the Real Estate Settlement Procedures Act ("RESPA"). A GFE must be provided to you three business days after submission of an application.

The GFE will break down all associated costs, fees, prepayments, and the estimate monthly costs. Important items to look for are discount points and broker fees (shouldn't pay more than 1% origination fee) and any pre-mortgage insurance (PMI).

Be sure to ask if there are any pre-payment penalties.

How do brokers get around the TILA and the 3 day rule? Most lenders don't have you fill out a formal application until closing only then do they conveniently add the GFE in the closing docs.

Always ask for a GFE and do your research to ensure all items have been covered. You can hold them accountable for extreme discrepancies.

No comments: