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Saturday, February 27, 2010
Page 3 of the GFE
Page 3 of the GFE contains important instructions and information that will help you shop for the best loan for you.
Understanding which charges can change at settlement
There are three different categories of charges that you will pay at closing: charges that cannot increase at settlement; charges that cannot increase in total more than 10%; and charges that can increase at settlement. You can use this as a guide to understand which charges can or cannot change. Compare your GFE to the actual charges listed on the HUD-1 Settlement Statement to ensure that your lender is not charging you more than permitted.
Written list of settlement service providers
A written list will be given to you with your GFE that includes all settlement services that you are required to have, and that you are allowed to shop for. You may select a provider from this list or you can choose your own qualified provider. If you choose a name from the written list provided, that charge is within the 10% tolerance category. If you select your own service provider, the 10% tolerance will not apply.
Even though you may find a better deal by selecting your own provider, you should choose the provider carefully as those charges could increase at settlement. If your loan originator fails to provide a list of settlement service providers, the 10% tolerance automatically applies.
Using the tradeoff table
The “tradeoff table” on page 3 will help you understand how your loan payments can change if you pay more settlement charges and receive a lower interest rate or if you pay lower settlement charges and receive a higher interest rate.
The loan originator must complete the first column with information contained in the GFE. If the loan originator has the same loan product available with a higher or lower interest rate, the loan originator may choose to complete the remaining columns. If the second and third columns are not filled in, ask your loan originator if they have the same loan product with different interest rates.
Using the shopping chart
You can use this chart to compare similar loans offered by different loan originators. Fill in each column with the information shown in the “Summary of your loan” section from the first page of all the GFEs you receive. Compare each offer and select the best loan for you.
Page 3 of the GFE contains important instructions and information that will help you shop for the best loan for you.
Understanding which charges can change at settlement
There are three different categories of charges that you will pay at closing: charges that cannot increase at settlement; charges that cannot increase in total more than 10%; and charges that can increase at settlement. You can use this as a guide to understand which charges can or cannot change. Compare your GFE to the actual charges listed on the HUD-1 Settlement Statement to ensure that your lender is not charging you more than permitted.
Written list of settlement service providers
A written list will be given to you with your GFE that includes all settlement services that you are required to have, and that you are allowed to shop for. You may select a provider from this list or you can choose your own qualified provider. If you choose a name from the written list provided, that charge is within the 10% tolerance category. If you select your own service provider, the 10% tolerance will not apply.
Even though you may find a better deal by selecting your own provider, you should choose the provider carefully as those charges could increase at settlement. If your loan originator fails to provide a list of settlement service providers, the 10% tolerance automatically applies.
Using the tradeoff table
The “tradeoff table” on page 3 will help you understand how your loan payments can change if you pay more settlement charges and receive a lower interest rate or if you pay lower settlement charges and receive a higher interest rate.
The loan originator must complete the first column with information contained in the GFE. If the loan originator has the same loan product available with a higher or lower interest rate, the loan originator may choose to complete the remaining columns. If the second and third columns are not filled in, ask your loan originator if they have the same loan product with different interest rates.
Using the shopping chart
You can use this chart to compare similar loans offered by different loan originators. Fill in each column with the information shown in the “Summary of your loan” section from the first page of all the GFEs you receive. Compare each offer and select the best loan for you.
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About Me
I'm a licensed mortgage professional that has been helping borrowers for the past 8 years refinance and obtain mortgages for new homes. I enjoy providing helpful mortgage information to people interested in financing their home. Feel free to contact me with any questions about your mortgage situation.
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