Q. I am confused by the term “Good Faith Estimate”.  What is that and can I rely on it?    T. Bradley, Paoli, PA.

A. What is that expression about being from the government and here to help you?   This particular form has been around a long time and causes me more headaches than any other form in the home buying process. It is supposed to be what a lender gives to a potential borrower to spell out all the costs of the loan, and many borrowers rely on it in selecting the lowest cost money, but until recently, there was no requirement that the lender then actually charge those amounts.  Hence the name “Estimate”.

When the trouble in loan land hit recently, many borrowers who thought they knew the terms of their loans were hit with revisions and changes.  Under a newly-revised format for these Estimates, lenders will not be able to vary by more than 10% from the estimated costs and will also have to split them out in more detail to prevent overcharging. Visit Good Faith Estimates for more information. HUD estimates a typical borrower should save $700 with the new format.  In our area, loan costs are about $1,000 to $2000 but in NYC, for example, they can run up to 2.5% of the loan.

Another form that is supposed to help home-buying consumers is the state Consumer Notice, also recently revised.  This is to be given to anyone by an agent at the time they discuss possible representation to explain agency options.  Many people think it is a contract or do not understand all the types of agency that can exist.  They are not aware, for example, that an agent may legally represent both the buyer and the seller at the same time.  No matter how many revisions that form gets, it is still destined to be confusing, in my opinion.

You should always ask to have documentation explained so that you feel you really understand it.  Buying a home is a monumental investment with a lot of complicated parts.  You deserve to have control over it.  

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