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What You Can Expect With Closing Fees
If you’re headed to a home closing in the near future, you’ll be pleased to know that thanks to The Real Estate Settlement Procedures Act (RESPA), you’re less likely to be blindsided by your total closing costs and fees. According to The US Department of Housing and Urban Development’s Web page, “RESPA requires that consumers receive disclosures at various times in the transaction and outlaws kickbacks that increase the cost of settlement services. RESPA is a HUD consumer protection statute designed to help homebuyers be better shoppers in the home buying process, and is enforced by HUD.”
RESPA also mandates that once you turn in an application for a loan, the mortgage lender is required to provide within three days a Good Faith Estimate (GFE) to the potential buyer. This standardized form is an itemized list of estimated fees and costs of the loan, and it allows you to shop around and compare costs with different lenders.
This estimate will include items such as: government fees and taxes, title and title insurance charges, inspection fees, lender’s fees, mortgage insurance, HOA transfer fees if applicable by neighborhood, and an escrow account for property taxes and homeowner’s insurance, if applicable by state or lender.
Attorney Wayne Crim of Larry R. Williams Law Firm in Nashville, Tenn., says that it’s important to remember that the GFE is just that—an estimate—and certain items can go up to 10% over what the lender suggested. This is mainly because the bank has no control over daily interest charges, homeowners insurance, and the cost of certain inspections such as for termites.
The final document used for a closing that includes all of the actual costs is referred to as the HUD-1 Settlement Statement. This standardized form must be issued to the borrower one day before closing. The borrower has every right to compare their Good Faith Estimate with this final form so that any questions about changes can be asked of the lender before closing.
Don’t ever be afraid to ask your lender questions before you sign any legal paperword. And don't forget that your Realtor and closing attorney (or agent) is there to answer questions and represent you at the closing.
Attorney Wayne Crim