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Settlement

Real Estate Settlement Procedures Act - RESPA - is a U.S. Real Estate law that states that you as a buyer should be given specific information when you're buying your property.

When you make a loan application you should be given a number of documents such as Settlement Costs Booklet as well as Good Faith Estimate. Your lender is legally obligated to do so and has to provide you with a Good Faith Estimate of the fees due at closing; this has to happen within three days of applying for a loan. The mortgage fees outlines - also called settlement costs - will cover every expense associated with the home loan such as title insurance or inspection.

The closing costs between 3% to 5% of the actual price of the house the best idea is to wait until you have your Good Faith Estimate before you decide to sign any loan papers. The best idea is to actually obtain the Good Faith Estimate from a couple of lenders and compare costs before asking the chosen lender to beat the competition's most attractive offer.

Good Faith Estimate

You have to remember that The Good Faith Estimate is an estimate of charges and may or may not correspond to the actual costs. For instance, your lender may not be aware of the fees for an escrow holder officer that you choose, or the precise amount that will be transferred into an escrow account for taxes and insurance purposes. These are the fees that you should find on your Good Faith Estimate:

· Title search as well as title insurance fees.

· The lender's attorney's fees as well as your (buyer's) attorney fees.

· Loan application and processing as well as credit check fees.

· The appraisal of the property fees as well as land survey fees.

· Inspection fees.

· Transfer taxes estimation.

· Document recording as well as documentary stamps on new note.

· Points and origination fees.

· Escrow account balances as well as pre-paid fees.

If you don't receive your Good Faith Estimate or Settlement Costs Booklet you need to contact the lender as well as the mortgage broker and have them deliver these booklets. Both the lender and the mortgage broker are required by RESPA to deliver these documents within the three-day time. The lender is supposed to give you these documents for sure only if you're purchasing the house. If your loan application is denied within the three-day period the lender does not have to provide these documents.

There's a misconception that RESPA requires the lender to maintain a cushion - this is an extra amount that ensures that the lender has enough money to make the payments when due .

RESPA does require that the lender maintain a cushion that is equal or larger than one-sixth of the total amount of items that are paid out of the account. If your state allows for a lesser amount to be maintained than you can go with that.

According to RESPA recent regulations do require that the lenders decrease the amount of the cushion in some of the accounts; be aware that some lenders may give an impression that they are required to make an increase on the cushion amount because of HUD (U.S. Department of Housing and Urban regulations) policies. This is not true - currently, it is always the lender that has chosen to make the increase.

Some states may require for the interest to be paid on escrow accounts but most of them don't. You also need to know that HUD can't figure out your particular escrow account cushion and the payments that you have to make -- you may want to request RESPA's guide on how to figure out this estimate yourself.

Sometimes your escrow account payments may go up as well; this is due to a number of things such as the fact that your bills might have gone up and your escrow account has changed to reflect that or your escrow account representative has changed the amount of cushion and increased it to the maximum that is permitted by RESPA. It's a good idea to check the statements and the loan documents to get an idea about the appropriate cushion amounts and all the changes.

The lender has to make all the payments in a manner that is timely, meaning on or before the deadline, in order to avoid penalties. The payments should not be more than thirty days overdue -- borrowers will review and consider their annual escrow statements to make sure that the lender doesn't make his or her payments late and charge penalties to the borrower's account.

If you think that your lender is requiring too much money in your escrow account first try to figure out the maximum amount RESPA allows to be considered in your escrow account. If you're still convinced that your lender is asking for too much money , you should contact them for an explanation. According to RESPA, section 6 the borrower is able to make a 'qualified written request' to their lender that concerns the way their loan account is being serviced. Such request won't be included with the monthly mortgage payment and the lender must acknowledge the complaint within twenty business days and must resolve this complaint within sixty business days. If the answer is not satisfactory you can file a complaint with the local HUD officer.

Things To Consider

In order to make sure all your Real Estate settlements proceedings go smoothly there are a number of things that you should keep in mind:

· Do ask lenders what fees they charge, as well as the interest rate and points, when shopping for a loan.

Do ask the builder whether you are required to use a certain provider in order to get a special concession. Do compare the costs of different settlement service providers before agreeing to use one to whom you were referred. Do ask to see the HUD-1 Settlement Statement a day before settlement, and compare the charges with those listed on the Good Faith Estimate. Do question the lender and settlement agent about any charges you do not understand. Keep making your mortgage payment on time, even if you have sent a complaint to your lender. Do forward any tax or insurance bills you receive, immediately to your lender. (If the lender is supposed to pay the bill). Do check your annual escrow account statement for mistakes. Do make a "qualified written request" when asking your lender for information or making a complaint. Do read the FAQs about Escrow Accounts carefully before filing an escrow complaint with a banking or government regulator.