HUD began requiring new and improved Good Faith Estimate (GFE) forms on January 1, 2010. The agency estimates that the new form will save borrowers an average of $700 per transaction. After two months of use, is the new form succeeding?

Do New Mortgage Disclosures Really Save You $700?

The new GFE has a lot of advantages--it puts the terms of your loan, its APR, whether it's a fixed rate or adjustable rate mortgage, and features like negative amortization, interest-only payments, or prepayment penalties right up front where you can't miss them. No more hunting through reams of riders and piles of paperwork. In addition, the estimate of fees has to be substantially accurate (most fees can't increase and some can increase by only 10%), or the lender pays the extra, not you. But the new GFE doesn't do the loan shopping for you.

Give Your Lender Accurate Information

Mortgage companies need more information from you than they used to in order to provide an accurate estimate. The property address, down payment or amount of home equity, property value or sales price, your Social Security number, your monthly income, the property use (primary residence, second home, or rental) and type (condo, single-family home, manufactured housing), are required to disclose an interest rate and applicable costs. As long as you are willing to provide such information, a lender is able--and should be willing--to provide you with a full, official Good Faith Estimate.

Beware Material Changes in Your Mortgage Application

The new law doesn't fully eliminate baiting and switching from the mortgage shopping experience, where a mortgage shopper receives lowball quotes, only to find that the true cost of the home loan is higher. The law only requires that the final GFE issued substantially match the closing statement--and you'll probably get several GFEs during the application process. New GFEs can be issued whenever there is a "material change" in the application. Material change occurs, for example, when you lock your mortgage rate, the property appraises for less than expected, your credit score changes, you switch jobs, or you change loan programs. The fees disclosed on last GFE are what the lender has to honor.

Some Lenders Don't Want to Provide a GFE

An article in Mortgage Professional magazine recommends that lenders avoid issuing a GFE until required by law (which is when you've applied for a loan). The writer also advises lenders not to fill in the voluntary sections of the GFE because it would "help clients shop them out of business." According to this mortgage professional, lenders should not guarantee the interest rate quote beyond one day, explaining that "the smartest way to deal with Line 1 of the GFE is simply don't guarantee the interest rate." But you can and should insist that lenders provide you with a full GFE or you'll go elsewhere. Don't waste time on any lender that knows its rates won't stand up to comparison.

Use the New GFE to Shop for a Refinance Mortgage or New Home Loan

Get a few GFEs when choosing new home and refinance mortgage lenders, but get a couple more when preparing to lock your interest rate as well. Track interest rate trends; if you see that rates have generally gone lower but yours increases, better have a serious discussion with your loan officer. Once your loan is locked and you have a final GFE, there should be no surprises at closing.