When you file your application for a loan, the lender must also, under the terms of RESPA, provide you with a Good Faith Estimate of settlement services charges you will likely incur. If the lender does not give it to you in person on the day of your loan application, it has three business days in which to put it in the mail or deliver it to you.

See Part Two of this information for a full item-by-item discussion of settlement services. On the form entitled "Settlement Statement", you will find Section L, which lists possible settlement services and charges you will encounter.

The lender is required to give you a Good Faith Estimate, based upon the lender?s experience in the locality in which the property is located, for each settlement charge in Section L of the HUD-1 Settlement Statement that the lender anticipates you will pay, except for paid-in-advance hazard insurance premium (line 903) and other reserves deposited with the lender (all Section 1000 items). The Estimate may be stated as either a dollar amount or range for each charge. Where the lender designates the use of a particular firm, the lender must make its Good Faith estimate based upon the lender?s knowledge of the amounts charged by the firm. The form used for this Good Faith Estimate must be concise and clear, and the estimates must bear a reasonable relationship to the costs you will likely incur. If the lender provides to you a Good Faith Estimate in the form of ranges, ask the lender what the total settlement costs will most likely be. While the lender is not obligated to provide this information under RESPA, it is important for you to know as you evaluate the different mortgage packages being offered you.

Lenders are not required to give a Good Faith Estimate for reserves deposited with them or for the prepaid hazard insurance premium because these charges require information not normally known to the lender at time of loan application. It is important for you to make these calculations because they can represent a sizeable cash payment you may have to make at settlement. Calculation of the reserve items is presented later in this information under "Reserve Accounts". Ask the lender what its policies are in terms of reserve accounts, for what items the lender requires reserves and for what period of time. You may want to ask the lender to run through a hypothetical calculation for you based upon the date you will most likely close on the home. Other assumptions may be necessary, for example, the assessed value of the property for determining property taxes. The lender can probably be more specific on hazard insurance premiums, particularly for those coverage which a lender requires.

Once you have obtained these estimates from the lender be aware that they are only estimates. The final costs may not be the same. Estimates are subject to changing market conditions, and fees may change. Changes in the date of settlement may result in changes in escrow and proration requirements. In certain cases, it may not be possible for the lender to anticipate exactly the pricing policies of settlement firms. Remember that the lender?s estimate is not a guarantee. Further, RESPA does not give specific remedy to HUD To remedy material deviation from the Good Faith Estimate.

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