RESPA: How to Understand The Homebuyer's Ally

RESPA could be your best friend if you are planning to buy a home.

Buying a home? Applying for a mortgage loan? Then RESPA is your best friend.

The Real Estate Settlement Procedures Act - better known by its acronym RESPA - is a statute designed to protect homebuyers who borrow mortgage money on their way to buying a home. Enforced by the U.S. Department of Housing and Urban Development, RESPA requires that lenders provide buyers certain disclosures throughout the buying process, disclosures that spell out exactly how much buyers are paying and what they are paying for.

The goal is to make sure that buyers are informed throughout the often complicated process of buying a home and applying for a mortgage loan. RESPA also forbids kickbacks and other illegal schemes that could artificially drive up the price of applying for a mortgage loan.

"RESPA is an important tool for anyone who is buying a home," said Marcus McCue, senior vice president at Guardian Mortgage Company. "Lenders are required to follow this statute. It's a way to prevent home buyers from overpaying for the services that go into originating a mortgage loan. It's certainly a tool that buyers need to know about before applying or shopping for a mortgage loan."

Guardian Mortgage Company offers a free 40-page handbook (http://scr.bi/FreeGuardianHandbook) for homebuyers to help them navigate the entire mortgage process. Page 23 of the handbook offers an in-depth look at RESPA and the protections that it provides.

As Guardian spells out, RESPA provides consumers with the right to shop for the best loan and to compare the charges of different mortgage brokers and lenders.

Under RESPA, lenders must inform buyers about the total cost of their loans, including the interest rate, points and other fees. RESPA also guarantees that buyers have the right to ask for a Good Faith Estimate, an estimate of all the loan and settlement charges that they'll face. Consumers have the right to ask for this before they agree to a mortgage loan or pay any fees.

Consumers have the right to know which fees are non-refundable if they should decide to cancel their loan agreements, and have the right to ask their mortgage brokers to explain exactly what these brokers will do for them.

RESPA states that buyers have the right to know how much their brokers are getting paid by them and by the lenders that are originating their loans. Under the statute, consumers also have the right to ask questions about any charges or loan terms that they don't understand.

Under RESPA, lenders are not allowed to make credit decisions based on applicants' race, color, religion, national origin, sex, marital status, age or whether applicants receive any income from public assistance.

Consumers have the right to know the reasons why their loan applications were rejected and the right to ask for the settlement-costs booklet "Buying Your Home," a booklet prepared by the U.S. Department of Housing and Urban Development.

If you'd like to learn more about RESPA and other mortgage matters, click on http://scr.bi/FreeGuardianHandbook to download your copy of the complete 40-page handbook. No information is required.

Categories:

Finance