Understanding the Changes Made on Closing Costs Rules and How This Can Help You
A home buyer simply cannot ignore closing costs. Thinking that it's just some small fees that you can easily provide out of pocket can really surprise you if you're not careful. When you apply for a loan from a lending company, they are supposed to give you a GFE (Good Faith Estimate) which is a list of estimated fees you will need to deal with in order to close the deal. As the name indicates, it's an estimate. Which means it can still go up and down. One can easily be unpleasantly surprised by the prospect of coughing up a few thousand dollars more than expected just for the closing costs. The Housing and Urban Development imposed a new ruling requiring lenders to change the way they communicate fees to borrowers.
Essentially, what happens is that the lenders are required to use a standardized form, instead of their own forms to communicate the GFE to the borrowers. This standardized form should make it easier for you to understand so that you can direct questions about the amount you can expect to pay to the lender. For example, a prospective home buyer who plans to purchase North Raleigh real estate will be better able to estimate the closing costs as he browses through North Raleigh homes for sale based on how much loan he will be approved for by the lender, and roughly on which items one can expect to still go up or down during the process.
It's also going to come as good news to the borrower that some fees are going to be capped, which means that they can only change up to a certain point. This will give you a modest savings when dealing with the closing costs. However, you should still be familiar with three types of fees you'll see in the list included in the GFE.
You'll see some fixed costs, which should include the creditor points you'll get approved for. This should be standard and should not fluctuate. At least you'll have a good idea of which fees you can count on not to change. This lessens the variables you will need to deal with and gives you a better idea of how much to save for the closing costs.
You'll also see some items that can fluctuate up to a certain point. Some fees are capped to increase only up to 10% of the amount. This is still quite unpredictable on your part but at least you'll only be dealing with a 10% change. It's best to understand which fees may reflect this limited fluctuation.
Then there are some fees which can change for an unlimited amount, which means that there's no cap to them. Such fees include title insurance fees, which can really depend on the title insurance provider. What you can do is to find your own insurance provider and see if they can give you a better deal. That way you can save money on the closing costs as well as be able to foresee how much money you need to prepare for this part of the closing costs.
Essentially, what happens is that the lenders are required to use a standardized form, instead of their own forms to communicate the GFE to the borrowers. This standardized form should make it easier for you to understand so that you can direct questions about the amount you can expect to pay to the lender. For example, a prospective home buyer who plans to purchase North Raleigh real estate will be better able to estimate the closing costs as he browses through North Raleigh homes for sale based on how much loan he will be approved for by the lender, and roughly on which items one can expect to still go up or down during the process.
It's also going to come as good news to the borrower that some fees are going to be capped, which means that they can only change up to a certain point. This will give you a modest savings when dealing with the closing costs. However, you should still be familiar with three types of fees you'll see in the list included in the GFE.
You'll see some fixed costs, which should include the creditor points you'll get approved for. This should be standard and should not fluctuate. At least you'll have a good idea of which fees you can count on not to change. This lessens the variables you will need to deal with and gives you a better idea of how much to save for the closing costs.
You'll also see some items that can fluctuate up to a certain point. Some fees are capped to increase only up to 10% of the amount. This is still quite unpredictable on your part but at least you'll only be dealing with a 10% change. It's best to understand which fees may reflect this limited fluctuation.
Then there are some fees which can change for an unlimited amount, which means that there's no cap to them. Such fees include title insurance fees, which can really depend on the title insurance provider. What you can do is to find your own insurance provider and see if they can give you a better deal. That way you can save money on the closing costs as well as be able to foresee how much money you need to prepare for this part of the closing costs.
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