2015 Loan Estimate

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blog-author-clayjeffreys3

As mentioned in my previous post, there are changes coming this August to the way loan terms and details are disclosed to borrowers. This time, we’ll focus on the new Good Faith Estimate (also called GFE).

I am a fan of the new GFE approved by the Consumer Finance Protection Bureau (which is technically called the “Loan Estimate”). There are some great changes appearing in the new GFE. These include, but aren’t limited to:

  • the loan terms are listed out in a easy to read summary on the first page
  • there is a place to show any seller contribution to closing costs and/or lender credits
  • an estimated cash to close is listed on both pages 1 and 2
  • there is an itemization of both closing costs and prepaid items on page 2
  • the Truth in Lending disclosure is being combined into the new GFE on page 3
  • there is a signature line on the good faith estimate (imagine that!)

 

It is great that clients can now actually sign the good faith estimate, which will eliminate a fourth page that lenders had to add on for borrowers to sign stating they receiving a copy of the GFE. Combining the details of the GFE, Truth in Lending, and providing a signature line, the new GFE actually reduced the number of pages from six to three. Less paper!

Click the link to view the 2015 GFE.

One aspect that is new is the replacing of the terms “closing costs” and “prepaids.” Historically, closing costs were the costs associated with the home purchase. These include lender fees, attorney fees, appraisal fee, title insurance, etc. These fees can differ from lender to lender.

Prepaids typically referred to setting up an escrow account, paying a full year of home insurance, and paying interest on the loan from the date of closing until the end of the month. These fees were the same regardless of the lender used for the transaction. Now the sum of all fees is referred to as closing costs, and there are two new categories:

  1. Loan Costs: this is the total of lender fees, third party fees (appraisal, credit report, etc.), and attorney fees.
  2. Other Costs: this includes insurance, escrow set up, taxes paid to city/state/county for purchasing a home, recording fees, HOA fees (if applicable), prepaid interest, etc.

That said, the 2015 GFE seems easier to read, understand, and contains all the needed information in one document. This is much better than referring to the GFE for terms of the loan, the Truth in Lending for the APR, the Fee Itemization worksheet (2 pages) for an itemized breakdown of closing costs along with the cash to close. Here is one part of the change that most are excited about coming to fruition. Next time we’ll focus on a change no one wants to see implemented.

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2 Responses to “2015 Loan Estimate”

  1. 2015 Closing Disclosure | The Mortgage Blog Says:

    […] Professional, Honest Mortgage Advice from Dunwoody Mortgage Services « 2015 Good Faith Estimate […]

  2. TRID implementation delayed | The Mortgage Blog Says:

    […] Loan Estimate […]

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