By Anessa V. Cohen
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 the applicant’s applying for a mortgage. The applicant must also sign a form stating that he or she is in receipt of the RESPA booklet.
Some of the stuff they have compiled in this booklet is nice and some of it is, in my opinion, ridiculous. The beginning of the booklet devotes an entire page to discussing the pros and cons of purchasing a house. It is kind of nuts to discuss this with the people receiving this booklet, who have probably already signed a sales contract to purchase a house and are now applying for a mortgage to complete the sale. At this stage, they want the prospective buyers to take a step back and think about whether or not they should buy a house? Or, better yet, are they now ready to buy a house? I think these questions at this juncture are like boarding 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. Again, this subject being brought up at this time is really after the fact. Also, the New York State 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. Why now 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 of handing out this kind of booklet at this stage is already too late for any use by the audience the RESPA people are looking to assist. If this booklet had been available to potential buyers prior to their initiation to the home-buying process, it would probably have been of more assistance and certainly more informative and educational. Instead, it is presented 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. Some topics are informative and educational for anyone contemplating the purchase of a new house, or even someone needing to refinance an existing mortgage and wanting to understand the mortgage process a little better than they did 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, then 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’s roles. 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 role of each item. Also discussed are the requirement for homeowner’s insurance and 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 the 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 you a brief synopsis.
Although there are a lot of interesting things to read in this booklet, the main problem is that it is so long that the majority of borrowers being handed this mini-Wikipedia of “home purchasing” never get past the first page. 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 that you have allotted yourself a large block of time to go through its entire contents! v
Anessa Cohen lives in Cedarhurst and is a licensed real-estate broker and a licensed N.Y.S. mortgage originator with over 20 years of experience, offering full-service residential, commercial, and management real-estate services (Anessa V Cohen Realty) and mortgaging services (First Meridian Mortgage). 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.cohen@AVCrealty.com.