Effective January 1, 2010, HUD regulations went into effect requiring lenders to use new Good Faith Estimate and HUD-1 forms in real estate transactions. As a real estate investor and home owner, I’ve had to read through my share of these forms, and they were long over due for an overhaul. The new forms are intended to make understanding the loan information a lot easier. Let’s take a look at each of the forms.
New Good Faith Estimate (GFE)
The GFE is a form lenders and mortgage brokers most give potential home buyers. The new form is designed to help borrowers better understand the terms of their loan. For example, here is how the form describes the home loan:
Good Faith Estimate
As you can see, the form makes it pretty easy to understand the terms of the loan. But one of the really nice features of the new form is how it compares different mortgage options. What was particularly difficult in the past was comparing mortgages that had different fee structures. To help consumers compare different loans, the new Good Faith Estimate form has two sections.
The first section is called the Tradeoff table (click to enlarge):
With home loans, borrowers can select to pay more upfront fees (called points) in exchange for a lower interest rate. You can now ask mortgage companies to complete the Tradeoff table so that you can better compare these options.
The second section allows consumers to fill in a simple table to help compare Good Faith Estimates received from different mortgage brokers. Called the Shopping Card (click to enlarge), here is what the table looks like:
All in all, it looks like HUD has done a good job simplifying what was a complicated form for many. You can download the form as a .pdf by clicking here.
New HUD-1 Form
The Good Faith Estimate is the form consumers get when they are shopping for a mortgage. The HUD-1 is the actual settlement statement detailing the loan fees, terms and so on that is received just before the closing. HUD has simplified the HUD-1, too, although the changes do not look as significant to me as with the GFE.
One helpful feature of the new HUD-1 is that it compares the fees that were outlined on the Good Faith Estimate with the actual fees on the HUD-1. Some fees should not change, others are permitted to change by a certain amount. The new HUD-1 makes it easy to see any changes. Here’s part of the form as an example (click to enlarge):
You can download a .pdf of the new HUD-1 form by clicking here. All things considered, both the new Good Faith Estimate and HUD-1 forms seem to be much easier to understand and more consumer-friendly.
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