To help clearly disclose the mortgage process, the federal government is giving their Good Faith Estimate document a makeover.  Effective January 1, 2010, the current 2-page form will be replaced by a newly revised standard 3-page version that will include an instructional page.

The biggest plus of this new Good Faith Estimate is that it uses everyday plain English to explain and clearly discloses the key loan terms and closing costs.  For instance, in one section titled Loan Summary, the Good Faith Estimate specifically addresses:

• What is your interest rate?
• Will your interest rate increase?
• Is there a prepayment penalty?

The new Good Faith Estimate includes educational elements that identify things like what charges are legally allowed to change at time of settlement and how a mortgage applicant can opt for higher fees in exchange for a lower mortgage rate.  In addition, HUD estimates this new regulation will save borrowers nearly $700 at closing.

Even with all of this disclosure, the Good Faith Estimate doesn’t address the question of, “Is this the right loan for this borrower?”  Unfortunately, the new Good Faith Estimate won’t prevent homeowners from choosing a bad loan; it only educates them about the facts of the loan.

That’s why it’s important to speak with a knowledgeable real estate professional so they can direct you to a trusted mortgage professional to help you meet your real estate mortgage goals.  Getting the best terms on a bad loan can be far worse than getting great terms on a loan that fits your needs.

HUD will require the new standardized GFE and HUD-1 beginning January 1, 2010. To view these documents, click on the following links:

HUD’s standard Good Faith Estimate
HUD-1 Settlement Statement

How much impact do you think this will have?  Share your opinions.