November 3, 2010
First time home buyers often feel a bit lost in the sea of loan vocabulary, federal laws and credit requirements they have to deal with in order to buy their new home. If you want to buy a new home with an FHA loan, there are plenty of people willing to help.
Unfortunately not all of them have the home buyer’s best interests in mind. That’s one of the reasons for the Real Estate Settlement Procedures Act or RESPA for short, which requires lenders to provide a standardized Good Faith Estimate — a document that clearly lists the terms of the home loan and closing costs.
RESPA was put into full effect on January 1, 2010. Thanks in part to those regulations, the FHA mortgage applicant is able to take full advantage of their rights as a homebuyer. But what are those rights? The FHA wants all loan applicants to know they have the right not only to be fully informed about the total cost of purchasing a home with an FHA mortgage, but also to shop around for the best loan before deciding on the lender.
The buyer has the right to get the Good Faith Estimate required under RESPA before committing to the loan and pay the associated fees. Once a buyer agrees to commit to the loan, they also have the right to know which fees are refundable and which are not if the loan agreement is canceled.
Buyers have the right to get clear answers to their questions about loan terms, fees and other issues they don’t understand. In the event a potential FHA guaranteed loan application is turned down, the buyer also has the right to know why.
All of these rights add up to one thing; the FHA’s philosophy that an informed buyer is not just a satisfied buyer, but also one who is protected from unscrupulous business practices or bad decision making due to ignorance of the facts. No house hunter should ever wonder how much they are paying–or why–without being given a complete answer. When you know how much your FHA mortgage will cost you, for how long and under what terms, buying a home is far less intimidating.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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