Closing Time - Respa and you

by : John West

Finding the home of your dreams can be one of the most exciting times of your life. But when you find the place you're ready to hang your hat, you'll have to forgo the welcome mat and housewarming while you enter the consumer world of mortgage brokers, lenders, settlement procedures and closing costs.

Fortunately, in America, home buyers are protected by the Real Estate Settlement Procedures Act (RESPA). In effect since 1974, RESPA is a consumer protection law that requires lenders and brokers to give borrowers information related to mortgage fees, closing costs and other behind-the-scenes details when purchasing a loan. The act is enforced by the US Department of Housing and Urban Development (HUD) and if you're new to the process of buying a home, you should take the time to familiarize yourself with some of the regulations that protect you. Below is a list of some of the rights mortgage consumers have under the law:


Though it may seem obvious, it's important to know exactly what you're paying for when you purchase a loan for your new home. Many first time home buyers are intimidated by the process and fail to ask pertinent questions. For most of them, this will be the single most important purchase of their lives. So before you sign on the dotted line, ASK your lender or broker what services they'll provide and what fees they'll charge along with the interest rate and points.


Much of the language involved in purchasing a mortgage is specific to financial worlds that most people only have a passing acquaintance with. If there are terms you don't understand, ask for clarification. You have the right to know what the various fees and terms represent before they become part of your financial life. Get the information you need to make the best decision for your future.


There are a wide range of financial products and services out there. Loans differ bank to bank and broker to broker, so don't take the first mortgage you are offered, shop around. Like shoes, cars, or cheese, a mortgage is a consumer product - though it will cost you significantly more! Even when builders offer you incentives to use their lender, you have the right to look around for the best deal you can get. Though choosing a different provider may loose you certain concessions, by law it cannot affect the final price of the house. Your mortgage will be with you for a while, make sure you compare prices and services before you commit.


Though a good faith estimate may differ from the final terms of mortgage, you have the right to one of these from your lender when you apply for a loan. The estimate will detail the expected fees at closing including inspections, title insurance, and taxes. Think of it as a quote. You can use Good Faith Estimates as a way of comparing offers from competing lenders.


Circumstances and minds change all the time, so make sure you know what your lender's refund policy is. Before you buy, ask which fees are non-refundable should you choose to back out of the agreement.


Though it's not normally polite to ask people how much money they make, when it comes to your mortgage broker, it's just fine. Your broker is providing a service and you have the right know how much they'll be getting paid by you and the lender when they find you a mortgage you want.


Or at the very least, you deserve a credit rating that is based on your financial history, NOT your culture, religion, where you come from, your sex, marital status, age or whether or not you receive government assistance. It's the law.


If your credit history is a mess you will probably have to take no for an answer, but if you get turned down for a loan, you have the right to know why. You can benefit from the experience by asking the lender why your application was refused - and they have to tell you.


When you apply for a loan, your lender or broker should provide you with a copy of the settlement costs booklet entitled "Buying Your Home" published by the US Department of Housing and Urban Development (HUD). Giving a general overview of the settlement process in America, this booklet will take some of the mystery out of buying a home. Give it a read! It may even give you ideas for negotiating terms, conditions and costs that save you money on your mortgage.