Companies involved in the mortgage loan process are required to follow detailed regulations. Many of these are detailed in the Real Estate Settlement Procedures Act — the Federal law commonly called "RESPA." The RESPA rules spell out the information that a lender has to provide to potential customers, step-by-step. They mandate detailed, full information about all costs, servicing details, account and escrow practices. They also mandate that lenders disclose any business relationships that they have with other parties involved in the transaction. In plain English, that means that you should be informed of existing relationships. If the mortgage process requires you to get your car washed, and the lender gets a commission from the car wash across the street, they have to tell you. Same for other not-so-silly business arrangements. The Dept of Housing and Urban Development - HUD - provides information on the RESPA regulations. Here are some of the current links: RESPA page that says nothing particularly useful. Settlement Costs Booklet The Settlement Costs booklet is quite useful and detailed — a recommended resource if youre starting the mortgage journey. HUD also sponsors housing counselors. Some consumers can qualify for counseling without any charges; where charges are involved for counseling, HUD requires that any counseling fees be "commensurate with the level of services provided." The HUD housing counseling agencies directory is here: https://apps.hud.gov/offices/hsg/sfh/hcc/hcs.cfm

Intimidated by mortgage loan terms and the list of fees? This short explainer video will help you get a handle on all of it. While a mortgage involves borrowing money for a home, there can be quite a few items and fees in the stack of papers. "Loan origination" -- the process of documenting and evaluating your loan application -- is not free. The "loan application fee" is one of the key components to understand. This fee generally covers: The lenders costs to verify, evaluate and underwrite the loan. This fee also pays for appraisal of the property — a professional valuation for the lender (not for the buyer.) Fees to "pull" your credit history. Other surcharges; ask the lender for a detailed list. Loan application fees are generally non-refundable.

Heres a short article and helpful explainer video, giving you some tips on choosing a lender for your mortgage loan. While applying for a mortgage can be intimidating, remember that lenders want your business! You are the customer, making one of the biggest purchases of your life. Companies you consider should be responsive, professional and helpful as you start sizing up your options. There are many advantages to working with a lender that has a local presence. They will have connections with the other businesses and government organizations involved in the purchase, and will know "how to do this" in your particular state and locality. A local presence also helps the lenders personnel be up-to-date on home values and conditions in the area, which could potentially be a factor in your search. Companies without a local presence should not automatically be rejected. Your communication preferences and record-keeping habits might make a national lender with a robust digital loan-processing system a fit. You should be comfortable with calls and video, rather than face-to-face conversation, if that looks like a fit. Advice from friends and family may be helpful, but keep this in mind. People do not buy homes as often as they buy groceries, or even cars. Verify the advice you receive with your own homework, online research, and feel for the situation.

Adjustable Rate Mortgages commit buyers to making loan payments that may change over time as market interest rates change. If interest rates go up, payments go up and the borrower has to meet those payment obligations. ARM rates may be lower than fixed rates now. Look at your personal situation to assess if you can handle the risk of future increases. Is your income likely to increase over the years to come? Will you be staying put, or do you anticipate selling the home and moving? While an ARM may put a larger loan amount in reach now, make sure you can keep up with that commitment if rates increase in the future.

Page 4 of the Loan Disclosure is NOT just standardized same-for-every-loan boilerplate. Review Page 4 on your disclosure carefully, including these terms: Partial Payments — what policies does the lender provide? Late Payments — what penalties apply, after what period of time? Negative Amortization — are payments that do not fully cover the interest due allowed? Do they result in increased loan principal? Early Repayment, or "Demand". Can the lender require earlier repayment than originally scheduled? Assumable/Assumption: If you sell or transfer the property, can the loan also be transferred? Escrow Account details — study these to be clear on which costs are covered, and which are not.

The Loan Disclosure form you will receive (at least 3 days before loan consummation) provides the costs and terms of the loan arrangement. Heres what you can expect on Page 2 of this standard form: Page 2, Section A figures SHOULD match your original Loan Estimate form. These figures include: Discount Points, if applicable. Origination Charges (collected by your lender) Origination Fees (fees paid to loan brokers, loan officers or similar parties) Page 2, Section B figures should be WITHIN 10% of the total from your Loan Estimate. These figures are the services that borrowers CANNOT shop; the lender supplied a list of the parties required for these services. Page 2, Section C figures may vary from the Loan Estimate. Charges from providers on the lenders provided list should be within 10% of the Loan Estimate. Others should be as you arranged with those external providers. Page 2, Section E figures should be within 10% of the matching Loan Estimate figures. Page 2, Sections E-F-G-H figures may vary from the matching Loan Estimate figures. Page 2 also includes a break-out of the costs paid at or before loan consummation: Costs YOU will pay. Costs the SELLER will pay. Costs paid by any others. Credits (if any) from the Lender

The mortgage Loan Estimate includes two lists of services involved in the loan process: services you CAN shop, and services you CANNOT shop. Borrowers are free to shop and compare the first list; they may have the lender provide these services, or another part. Borrowers MUST use the lender or listed provider for services on the other list. The CAN shop list might include the following: Pest Inspection Property-Line Survey Title-related services. These might be broken down further: Lenders title policy, protecting the lenders interest in the collateral (usually, the property.) Settlement agent fees, to cover the costs of facilitating the final transaction. Title Search, to document legal ownership of the property. Title Insurance Binder, which allows use of the title search results for a period of time. Fees from providers on the list provided by the lenders are restricted by the Loan Estimate figures; their fees cannot change by more than 10% between estimate and closing disclosure. Providers not on the list are not restricted by the Loan Estimate; the lender is not responsible for changes in their fees or variances from the estimate.

The mortgage Loan Estimate includes two lists of services involved in the loan process: services you CANNOT shop, and services you CAN shop. See the other video in this series on "can shop." The Cannot Shop list covers fees and costs for outside parties (not the lender themselves). This list may include: Tax status research on the property Tax monitoring on property-tax payments Appraisal, which gives the lender a reliable value for the property Credit Reporting on the borrower. Flood Risk fees Flood Zone Monitoring Fees for these services in the Loan Estimate and in the final Loan Disclosure must match. There is ZERO tolerance for change on these items under lender compliance regulations.

Final mortgage costs may differ from the loan estimate, but the differences are defined by legal tolerances for some cost categories. For items limited to 10% change tolerance — recording-services charges and non-shoppable 3rd-party services — amounts paid over the Loan Estimate for these categories must be refunded. For all other items, including the services which a borrower is allowed to shop, differences between payment and closing, and Loan Estimate, are not refundable. The lender must arrange refunds within 60 calendar days (NOT business days) of loan consummation.

A mortgage Loan Estimate is just that — an estimate. Your actual loan costs might be higher or lower than the estimate, within certain legally-specified limits for some items, and without defined limits for others. Items with a 10% change limit include: Charges for recording services 3rd-party services on the list provided by the lender Items which might change without legally-defined tolerances: Prepaid Interest Property Insurance Premiums Escrow or Reserve Deposits Items with ZERO tolerance, that should not change: Transfer taxes Fees paid to the lender Fees paid to a mortgage broker, or to affiliates of the lender or the broker. Fees paid to any 3rd parties on the "CAN NOT SHOP" list provided on the Loan Estimate. Compare the Loan Estimate and the Closing Disclosure before loan consummation.