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Home buyers are often confused about where to begin in
their search for a home loan. The process is usually
narrowed down to finding which institutions provide
the lowest settlement costs, but the different types
of lending institutions and the variety of lending
programs available can make the search a slow,
difficult experience.
Real estate settlement costs are fees buyers
normally pay when purchasing a home such as legal
services property insurance, mortgage loan financing
and title services. In the past, consumers would have
to call each lender, request an estimate of their
settlement costs and compare all of the results to
find which lender offered the lowest total settlement
costs.
The Department of Housing and Urban Development,
however, recently revised the Real Estate Settlement
Procedures Act (RESPA) which now makes it easier for
consumers to estimate various settlement costs through
computer loan origination programs. In this manner,
consumers can access a computer listing of various
programs offered by lending institutions.
The computer search speeds the process of reviewing
various programs and allows participants to arrange
financing with the listed lender. Buyers using a
computer loan origination program may be required to
pay a fee for this service, but many buyers feel the
convenience outweighs the cost. Still, the new RESPA
changes require a real estate broker with a computer
loan origination program to inform the buyer that the
service is only an option and that non-listed lenders
may offer lower rates or fees.
The new Federal Regulations also permit real estate
brokers to offer more comprehensive services to home
buyers by allowing brokers to enter into controlled
business arrangements with other companies associated
with the home buying process. Real estate brokers were
always allowed to refer buyers to lending
institutions, title companies and escrow companies,
but they were not permitted to accept compensation
from those institutions for giving a referral. The
RESPA changes now allow real estate brokers to enter
into partnerships or actually open their own mortgage
service institutions. This allows brokers to provide
virtual “one-stop shopping” by handling the entire
settlement process.
RESPA changes were made to help home buyers learn
about and obtain mortgage services more conveniently.
Since RESPA helps consumers to understand the process
of home ownership, the regulations may encourage more
potential buyers and further stimulate the real estate
market.
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