If you've ever bought a home, you know firsthand how confusing the process can sometime seem, especially when it comes time to review your loan paperwork. Sure, the Good Faith estimate (GFE), Truth In Lending document and HUD-1 form that are provided now are supposed to 'clearly' spell out the terms of your loan, both at the beginning of the lending process and at closing. But fully understanding the information those documents provide – and trying to ensure the terms haven't changed – can be extremely difficult.
Fortunately, that's all changed: A couple years ago, two new mortgage disclosures will be launched to replace the current documents. Even the names – Loan Estimate disclosure and Closing Estimate disclosure – are more straightforward. Here's a comparison to help you understand the differences:
Say Goodbye to Good Faith Estimate (GFE), Truth In Lending and HUD-1
The purpose of the current GFE form is to provide borrowers with a list of settlement charges they can expect at closing, but while that sounds great, the actual form looks a little bit like an income tax form – loads of blanks and boxes spread out over three pages. The Truth In Lending statement isn't much better; yes, it's only two pages, but the format and information can be cumbersome to wade through.
The HUD-1 settlement disclosure is delivered at closing – actually, you'll receive it at least a day ahead of time as required by law. It has all the charges and fees that you'll actually be expected to pay when you sign the final closing documents during settlement, and if you notice anything suspicious, that's the time to ask and/or object. It's also the time to compare it to the GFE and Truth In Lending disclosures to make sure your loan terms haven't changed, And that's where it gets tricky. The HUD-1 form uses a completely different format from either of the two forms buyers receive earlier in the process, and cross-referencing all three of them makes for a stressful experience.