When you refinance your home mortgage, the closing requires many steps. Although you won't be working with another party as you did when you purchased the home, your lender still requires certain actions and fees. These fees, called closing costs, are applicable to refinance as well as purchase transactions and are listed on the HUD-1 Settlement Statement.
Understand the HUD-1
If you’ve already purchased a home, you’re probably familiar with the HUD-1 Settlement Statement. This government-standardized form lists all the fees associated with your loan, with entries for fees such as loan origination, APR, prepaid property taxes, mortgage insurance and title insurance. It also includes a final figure of the exact amount you need to pay to close the deal.
Know the RESPA Requirements for the HUD-1
The Real Estate Settlement Procedures Act, also known as RESPA, is a series of laws that help protect consumers participating in real estate transactions. These regulations, which specify how settlement service providers do business with their customers and other providers, require your lender to furnish you with a HUD-1 Settlement Statement at least 24 hours prior to the close of your transaction. If your lender doesn't follow these prescribed instructions, you can file a complaint with the Consumer Finance Protection Bureau, the CFPB.
Compare With the GFE
While 24 hours may not be much time to find out how much you’ll need to pay to close your transaction, you probably already have an idea because your lender is also required to give you a Good Faith Estimate within three days of receiving your loan application. The GFE includes information about the mortgage itself, such as the principal amount, interest rate, required mortgage insurance and your monthly payment. The form also lists estimated closing costs. These costs must remain within a certain range, known as a tolerance level, when you close the transaction. By comparing your HUD-1 with your GFE, you can verify that the estimated fees didn't fluctuate more than RESPA allows. If they did, your lender is required to pay you a tolerance cure.
Address Your Concerns
If you’re refinancing your mortgage, you’re likely looking to save money. That’s a thorough examination of your HUD-1 form is essential. If you see any discrepancies or any other issues on your HUD-1, address these with your lender as soon as possible. However, if your lender is unwilling to answer your questions or remedy your concerns, you have the right to renege on the transaction and file a complaint with the CFPB.
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