Many new mortgage guidelines have come into play these last few years, but one of the more interesting ones to hit the mandatory “present to potential borrowers” list is a 45-page booklet called “Shopping For Your New Home: HUD’s settlement cost booklet.”
Under The Real Estate Settlement Procedures Act (RESPA), all lenders and mortgage brokers are now required to present this booklet to every applicant for a loan within three days of said applicant’s applying for a mortgage. The applicant must also sign a form stating that he or she in fact in in receipt of the RESPA booklet.
Some of the stuff they have compiled in this booklet is very nice—and some of it, in my opinion, is ridiculous. The beginning of the booklet discusses the pros and cons of a buyer contemplating the possible purchase of a house. It is kind of nuts, as the people receiving this booklet have probably already signed a sales contract to purchase a house and have just come across this booklet now that they are applying for a mortgage to complete that sale. At this stage they want the proposed buyers to take a step back and think about whether or not they should buy a house? Or better yet, are they ready to buy a house? I think asking these questions at this juncture is like trying to board a boat that has already sailed!
After this subject has waned a few pages later, the booklet starts to explain the role of a real estate broker with the prospective borrowers. Again, bringing up this subject at this time is really after the fact, and anyway, the New York Department of State has already taken this role on themselves by creating a disclosure that is given to each potential buyer when they start looking at homes with a real estate broker. So why add this into an already long-winded booklet of 45 pages when this bridge has been crossed long before the potential buyer has seen this publication?
This is not to say that this stuff is not important, only that the timing is off; handing out this kind of booklet at this stage is already too late for any use for the audience the RESPA people are looking to assist. Now, if this booklet were available to potential buyers prior to their initiation of the home buying process, it would probably be of more assistance and certainly more informative and educational than halfway to the finish line when they have already seen, negotiated, and ultimately gone to contract on a house and now just need to go through the mortgage process to complete the purchase of their new home.
Now that I trashed the structure of this booklet and the timing of when it is distributed, let me talk about the positive things that have been included in this booklet that are informative and educational for anyone contemplating the purchase of a new house, or even someone who needs to refinance an existing mortgage and wants to understand the mortgage process a little better than the first time around.
The RESPA book is structured to walk a buyer step by step through the entire purchasing process from the time the idea pops in their heads through the mortgage application process, with intricate explanations of each segment of the application and disclosure as well as closing HUD form details and then the closing process and the itemized closing costs.
It takes you through the home shopping stage, explaining in detail the roles of the real estate broker or salesperson, the home inspector, the buyer’s and seller’s lawyers, and the bank attorney. It then goes through the application process of the mortgage, explaining the different disclosures and forms in detail so a new borrower can understand the purpose of each item: such as a requirement for homeowner’s insurance, or the role of a good faith estimate, which must be given to a prospective borrower within three days of applying for a mortgage loan, which breaks down the individual closing costs as well as interest rate a borrower might expect together with a breakdown of the cost the borrower is paying to get this mortgage. The booklet goes into this much more extensively; I am only giving a brief synopsis.
Although there are, in fact, a lot of interesting points to read in this booklet, the problem is that it is so long that the majority of borrowers who are handed this mini Wikipedia of home purchasing never get past the first page; therefore, the desired effect of making sure every borrower gets a copy of it in advance is lost when the borrower decides to use it as a coaster instead.
Anyway, if you need something to read, this booklet is interesting. Just make sure you have allotted a large block of time to go through its entire contents!
Anessa Cohen lives in Cedarhurst and is a licensed real-estate broker (Anessa V Cohen Realty) and licensed N.Y.S. mortgage originator with over 20 years of experience offering full-service residential, commercial, and management real-estate services as well as mortgage services. She can be reached at 516-569-5007 or via her website, www.AVCrealty.com. Readers are encouraged to send questions or comments to anessa@AVCrealty.com. Read more of Anessa Cohen’s articles at 5TJT.com.
