The Real Estate Settlement Procedures Act requires that mortgage applicants receive several mortgage loan disclosure statements. These statements inform you about the costs you'll incur by taking out a mortgage. You'll also learn whether your lender will sell your mortgage and how the lender will set up your escrow account. The purpose of the statements is to give you the information you need to make an informed decision. RESPA regulations also eliminate referral fees and financial incentives that could increase the cost of your mortgage application.
When you apply for a mortgage, the lender or the mortgage broker must give you several disclosures, including a good faith estimate, a mortgage servicing disclosure statement, and a consumer information booklet. The good faith estimate spells out the estimated fees you'll need to pay at closing. In the mortgage servicing disclosure statement, the broker will tell you if your loan will be sold to another lender. The consumer information booklet contains information about various mortgage brokers. You should also get a brief explanation about the information in the statements and the opportunity to ask questions.
Before you close on your home, you should receive two additional disclosure statements. The first is the affiliated arrangement disclosure. You must receive this statement if you receive a referral to a provider the mortgage broker has a business relationship with. The disclosure will detail what type of relationship exists between the two businesses and what fees the provider may charge you. You should also receive a HUD-1 settlement statement, which will show which loan transaction costs the seller and you will pay at closing.
You'll receive the final HUD-1 settlement statement when you close. Rather than just an estimate, the statement will reflect your actual costs. Examples of possible costs include loan origination and title fees. At closing, you will also receive an initial escrow statement. In the escrow details, you should see the estimated costs for real estate taxes and insurance. The statement will show how your escrow account will pay these costs for the first year. Your monthly escrow amount, which you pay with your principal and interest, will be stated.
Each year that you pay into your mortgage, you'll receive an annual escrow statement. Your lender is required to send this to you after the end of the fiscal year. Your annual escrow statement will tell you how much you've paid into the account. You'll also see how much your lender paid out in taxes on your behalf. If your lender sells or transfers your loan to another provider, you should receive a servicing transfer statement. The lender has 15 days before the transfer to notify you of the new provider's name, address, telephone number and the transfer's effective date.
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