Whether you are a rookie or a seasoned owner, buying a home can be costly and confusing. But new consumer protections can help you better sort out your options. Previously, even if you shopped for the best interest rate, you may have not gotten the best deal because your closing costs weren't revealed upfront. That's changed.

Closing costs are the fees the lender charges to close the loan -- complete the transaction -- and include items such as:

• discount points
• credit reports
• application fee
• title search and insurance
• appraisal fee
• document delivery fees
• document preparation
• copying
• wiring
• preparing endorsements
• document handling and notarization

These costs are itemized in a document called a "Good Faith Estimate" or GFE. The GFE lists those items that are usually paid by the buyer, even if the purchase contract you've negotiated requires the seller to pay for particular services or another third party is paying for them.

Timely Response

Now, lenders must give you an initial disclosure of your estimated mortgage costs within three business days of submitting your application. These include the GFE and the Truth-in-Lending form that states the loan's annual percentage rate, or APR. Typically, the APR is higher than the nominal interest rate because loan discount points and other charges are packaged into the loan.

Once you receive these initial disclosures, there's a seven day waiting period (except in emergency situations) before the loan can close. If an actual APR goes up more than 0.125 of a percentage point than the rate stated on the initial disclosure, for example, 5.126% instead of 5%, a new seven-day waiting period is required.

Prior to issuing a GFE, a lender is allowed to charge you for a credit report. But that's it. Lenders may no longer charge application fees or other costs until after you've received and signed off on your initial disclosure documents. So now you're no longer stuck with an application fee or other payment, if the disclosures reveal something that convinces to get your loan elsewhere. You have 10 days (or the lender may specify a longer time frame) to indicate your intent to continue with an application. After that, the lender is no longer bound by the GFE.

Final disclosures, including the actual APR, must now be delivered three days prior to the closing.

Beginning in January 2010, lenders will be required to use a new GFE that includes a "tradeoff table." Loan originators can present the different interest rates and closing cost options available and you will be able to compare "apples to apples" in choosing where to finance your new home.

For more information about closing costs, please visit Housing and Urban Development's Web site at www.hud.gov/respa or email hsg-respa@hud.gov.

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