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Good Faith, Bad Form

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Posted On: 04/14/2010

QUESTION:

It’s now 2010 and my lender tried to tell me how much my loan will cost by using an old Good Faith Estimate of closing costs. Don’t all lenders have to use the new form created by HUD?

ANSWER:

You bet. As FHA Commission David H. Stevens explains,”There should be no confusion about when the mortgage industry must begin using the new forms. That date is January 1, 2010.”

Make no mistake, you want the newly minted, freshly written, plainly designed, clear-as-a-bell 2010 Good Faith Estimate required by HUD. Protect your interests and get your estimate in writing and on the right form. Accept no spreadsheets, verbal estimates or old forms – these are financial clunkers that should be assigned to the scrap heap of mortgage lending.

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The reason some lenders oppose the new form is that it requires them to plainly list loan costs, prohibits changing some of those costs at closing and provides an easy way to compare lender offers. Borrowers, of course, want all of these benefits.

QUESTION:

We’re selling our home and closing is in three days. Our buyer is now demanding that we pay $500 for a termite treatment even though the house is being sold “as is.” The damage found by the termite inspector involves old wooden crates outside the house used for gardening. The property is priced at $550,000.

ANSWER:

Generally the term “as is” means the home is being sold without any warranty as to condition. However, you can’t hide any material defects, and you should encourage the buyer to get a professional home inspection.

You’re probably not obligated to pay the $500, but this demand likely has nothing to do with termites. Instead, it may be a good example of buyer’s remorse, general worries about the act of purchasing. Unless you have another buyer lined up, pay the $500. It’s quicker and probably cheaper than finding a new buyer. For specifics, speak with your broker or attorney.

Peter G. Miller is the author of The Common-Sense Mortgage and a veteran real estate columnist. Have a question? Please write to peter@ctwfeatures.com.

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