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How to Read the Good Faith Estimate (GFE)

Good Faith Estimate (GFE)

You can grab the Full 49 Page HUD’s new settlement cost booklet (updated 1/6/2010 with corrections of minor detail)

The GFE is a three page form designed to encourage you to shop for a mortgage loan and settlement services so you can determine which mortgage is best for you.  It shows the loan terms and the settlement charges you will pay if you decide to go forward with the loan process and are approved for the loan.  It explains which charges can change before your settlement and which charges must remain the same.  It contains a shopping chart allowing you to easily compare multiple mortgage loans and settlement costs, making it easier for you to shop for the best loan. The GFE may be provided by a mortgage broker or the lender.  Until they give you a GFE loan originators are only permitted to charge you for the cost of a credit report.

In the loan application process, the loan originator will need your name, Social Security number, gross monthly income, property address, estimate of the value of the property, and the amount of the mortgage loan you want to determine the GFE.  Your Social Security number is used to obtain a credit report showing your credit history, including past and present debts and the timeliness of repayment.

Your GFE Step-by-Step

Page 1 of the GFE

Now let’s go through the GFE step-by-step. The top of page 1 of the GFE shows the property address, your name and contact information and your loan originator’s contact information.

Important Dates

The Important Dates section of the GFE includes key dates of which you should be aware.

Line 1 discloses the date and time the interest rate offer is good through.

Line 2 discloses the date “All Other Settlement Charges” is good through. This date must be open for at least 10 business days from the date the GFE was issued to allow you to shop for the best loan for you.

Line 3 discloses the interest rate lock time period, such as 30, 45 or 60 days, that the GFE was based on. It does not mean that your interest rate is locked.

Line 4 discloses the number of days prior to going to settlement that you must lock your interest rate.

Note: “Locking in” your rate and points at the time of application or during the processing of your loan will keep the interest rate and points from changing until the rate lock period expires.

Summary of Your Loan

The Summary of Your Loan Terms discloses your loan amount, loan term, the initial interest rate and the principal, interest and mortgage insurance portion of your monthly mortgage payment.  It also informs you if your interest rate can increase, if your loan balance can rise, whether your mortgage payment can rise and if there is a prepayment penalty or balloon payment.

In the example above, the loan amount is $200,000 which will be paid over 30 years. The initial interest rate is 5 percent and the initial monthly mortgage payment is $1,173 which includes mortgage insurance, but does not include any amounts to pay for property taxes and homeowner’s insurances if required by the lender.

In our example, the loan has an adjustable interest rate.  Since the interest rate can rise, the ‘yes’ box was checked, and the loan originator disclosed that the initial interest rate of 5 percent could rise as high as 10 percent.  The first time your interest rate could rise is 6 months after settlement which could increase your payments to $1,290. Over the life of your loan your monthly payments could increase from $1,173 to $1,842.

This example does not contain a balloon payment or a prepayment penalty.

NOTE:  A prepayment penalty is a charge that is assessed if you pay off the loan within a specified time period, such as three years.  A balloon payment is due on a mortgage that usually offers a low monthly payment for an initial period of time.  After that period of time elapses, the balance must be paid by the borrower, or the amount must be refinanced.  You should think carefully before agreeing to these kinds of mortgage loans.  If you are unable to refinance or pay the balance of the loan, you could put your home at risk.

Escrow Account Information

The GFE also includes a separate section referred to as ”Escrow account information,” which indicates whether or not an escrow account is required. This account holds funds needed to pay property taxes, homeowner’s insurance, flood insurance (if required by your lender) or other property-related charges.

If the GFE specifies that you will have an escrow account, you will probably have to pay an initial amount at settlement to start the account and an additional amount with each month’s regular payment.  If you wish to pay your property taxes and insurance directly, some lenders will give you a higher interest rate or charge you a fee.  If your lender does not require an escrow account, you must pay these items directly when they are due.

Summary of Your Settlement Charges

The final section on page 1 of the GFE contains the adjusted origination charges and the total estimated charges for other settlement services which are detailed on page 2.  You should compare the “Total Estimated Settlement Charges” on several GFEs.

Page 2 of the GFE

The price of a home mortgage loan is stated in terms of an interest rate and settlement costs.   Often, you can pay lower total settlement costs in exchange for a higher interest rate and vice versa.  Ask your loan originator about different interest rates and settlement costs options.

Your Adjusted Origination Charges, Block A

Block 1, “Our origination charge” contains the lender’s and the mortgage broker’s charges and point(s) for originating your loan.

Block 2, “Your credit or charge point(s) for the specific interest rate chosen.”

  • If box 1 is checked, the credit or charge for the interest rate is part of the origination charge shown in Block 1.
  • If box 2 is checked, you will pay a higher interest rate and receive a credit to reduce your adjusted origination charge and other settlement charges.
  • If box 3 is checked, you will be paying point(s) to reduce your interest rate and, therefore, will pay higher adjusted origination charges.

Note: A point is equal to one percent of your loan amount.

After adding or subtracting Block 2 from Block 1, “Your Adjusted Origination Charge” is shown in Block A.

In the example shown, the origination charge is $6,750.  No points were paid to reduce the interest rate. Instead, because of the interest rate chosen, the offer contains a $3,000 credit that reduces the adjusted origination charge to $3,750.

Your Charges for All Other Settlement Services, Blocks 3 through 11

In addition to the charges to originate your loan, there are other charges for services that will be required to get your mortgage.  For some of the services, the loan originator will choose the company that performs the service (Block 3). The loan originator usually permits you to select the settlement service provider for “Title services and lender’s title insurance” (Block 4).  “Owner’s title insurance” is also disclosed (Block 5).  Other required services that you may shop for are included in “Required services that you can shop for” (Block 6).

Block 3 contains charges for required services for which the loan originator selects the settlement service provider. These are not “shoppable” services and often include items such as the property appraisal, credit report, flood certification, tax service and any required mortgage insurance.

Block 4 contains the charge for title services, the Lender’s title insurance policy and the services of a title, settlement or escrow agent to conduct your settlement.

Block 5 contains the charge for an Owner’s title insurance policy that protects your interests.

NOTE: Under RESPA, the seller may not require you, as a condition of the sale, to purchase title insurance from any particular title company.

Block 6 contains charges for required services for which you may shop for the provider.  Some of these items may include a survey or pest inspection.

Block 7 contains charges by governmental entities to record the deed and documents related to the loan.

Block 8 contains charges by state and local governments for taxes related to the mortgage and transferring title to the property.

Block 9 contains the initial amount you will pay at settlement to start the escrow account, if required by the lender.

Block 10 contains the charge for the daily interest on the loan from the day of settlement to the first day of the following month.

Block 11 contains the annual charge for any insurance the lender requires to protect the property such as homeowner’s insurance and flood insurance.

Total Estimated Settlement Charges

“Your charges for All Other Settlement Services”, Blocks 3 through 11, are totaled in Block B.  Blocks A and B are added together resulting in the total estimated settlement charges associated with getting the loan. These Blocks are carried forward to the bottom of page 1 of the GFE.

Page 3 of the GFE

Page 3 of the GFE contains important instructions and information that will help you shop for the best loan for you.

Understanding which charges can change at settlement

There are three different categories of charges that you will pay at closing: charges that cannot increase at settlement; charges that cannot increase in total more than 10%; and charges that can increase at settlement.  You can use this as a guide to understand which charges can or cannot change.  Compare your GFE to the actual charges listed on the HUD-1 Settlement Statement to ensure that your lender is not charging you more than permitted.

Written list of settlement service providers

A written list will be given to you with your GFE that includes all settlement services that you are required to have, and that you are allowed to shop for. You may select a provider from this list or you can choose your own qualified provider.  If you choose a name from the written list provided, that charge is within the 10% tolerance category.  If you select your own service provider, the 10% tolerance will not apply.

Even though you may find a better deal by selecting your own provider, you should choose the provider carefully as those charges could increase at settlement.  If your loan originator fails to provide a list of settlement service providers, the 10% tolerance automatically applies.

Using the tradeoff table

The “tradeoff table” on page 3 will help you understand how your loan payments can change if you pay more settlement charges and receive a lower interest rate or if you pay lower settlement charges and receive a higher interest rate.

The loan originator must complete the first column with information contained in the GFE.  If the loan originator has the same loan product available with a higher or lower interest rate, the loan originator may choose to complete the remaining columns. If the second and third columns are not filled in, ask your loan originator if they have the same loan product with different interest rates.

Using the shopping chart

You can use this chart to compare similar loans offered by different loan originators.  Fill in each column with the information shown in the “Summary of your loan” section from the first page of all the GFEs you receive.  Compare each offer and select the best loan for you.

After You Choose the Best Loan for You

After comparing several GFEs, select the best loan for you and notify the loan originator that you would like to proceed with the loan. Keep your Good Faith Estimate so you can compare it with the final settlement costs stated on your HUD-1 Settlement Statement.  Ask the lender and settlement agent if there are any changes in fees between your GFE and your HUD-1 Settlement Statement. Some charges cannot be increased, and your lender must reimburse you if those charges were illegally increased.

New Home Purchases

If you are purchasing a new home that is being built or has not been built yet, your GFE could change.  If the GFE can change, the loan originator must notify you that the GFE may be revised at any time up to 60 days before settlement.  If you get a revised GFE, look at it to determine if the loan and settlement costs it discloses are the best for you.

Changed Circumstances

If there are changes involving your credit, the loan amount, the property value, or other information that was relied on in issuing the original GFE, a revised GFE may be issued.  Only the charges affected by the changed circumstance may be revised.

8 Reasons Why You Should Work With a REALTOR

Not all real estate practitioners are REALTORS . The term REALTOR is a registered trademark that identifies a real estate professional who is a member of the NATIONAL ASSOCIATION of REALTORS and subscribes to its strict Code of Ethics. Here are five reasons why it pays to work with a REALTOR .

1. Navigate a complicated process. Buying or selling a home usually requires disclosure forms, inspection reports, mortgage documents, insurance policies, deeds, and multipage settlement statements. A knowledgeable expert will help you prepare the best deal, and avoid delays or costly mistakes.

2. Information and opinions. REALTORS can provide local community information on utilities, zoning, schools, and more. They ll also be able to provide objective information about each property. A professional will be able to help you answer these two important questions: Will the property provide the environment I want for a home or investment Second, will the property have resale value when I am ready to sell

3. Help finding the best property out there. Sometimes the property you are seeking is available but not actively advertised in the market, and it will take some investigation by your REALTOR to find all available properties.

4. Negotiating skills. There are many negotiating factors, including but not limited to price, financing, terms, date of possession, and inclusion or exclusion of repairs, furnishings, or equipment. In addition, the purchase agreement should provide a period of time for you to complete appropriate inspections and investigations of the property before you are bound to complete the purchase. Your agent can advise you as to which investigations and inspections are recommended or required.

5. Property marketing power. Real estate doesn t sell due to advertising alone. In fact, a large share of real estate sales comes as the result of a practitioner s contacts through previous clients, referrals, friends, and family. When a property is marketed with the help of a REALTOR , you do not have to allow strangers into your home. Your REALTOR will generally prescreen and accompany qualified prospects through your property.

6. Someone who speaks the language. If you don t know a CMA from a PUD, you can understand why it s important to work with a professional who is immersed in the industry and knows the real estate language.

7. Experience. Most people buy and sell only a few homes in a lifetime, usually with quite a few years in between each purchase. Even if you have done it before, laws and regulations change. REALTORS , on the other hand, handle hundreds of real estate transactions over the course of their career. Having an expert on your side is critical.

8. Objective voice. A home often symbolizes family, rest, and security  it s not just four walls and a roof. Because of this, homebuying and selling can be an emotional undertaking. And for most people, a home is the biggest purchase they ll every make. Having a concerned, but objective, third party helps you stay focused on both the emotional and financial issues most important to you.

Reprinted from REALTOR magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS .
Copyright 2008. All rights reserved.

CalHFA Homeownership Programs Divison

The CalHFA Homeownership Programs Divison provides affordable housing opportunities by offering below-market interest rate mortgage loans to very low-to-moderate income first-time homebuyers. The Program strives to achieve availability of mortgage funds 365 days a year, an equitable geographic distribution of its loans throughout the state, and an equal balance between newly constructed and resale homes. There are several unique features and programs offered which may fit the need of the prospective buyer.

CalHFA establishes partnerships with lenders, local housing agencies, builder/developers, real estate professionals, and other intermediaries in order to develop and deliver its programs. This collaborative approach helps expand homeownership opportunities by maximizing the collective financial resources available to borrowers.

The Homeownership Programs division offers information on:


  • Programs (CalHFA and Prop. 46 Programs)

Mortgage Loan Programs:

  • Homeownership Mortgage Loan Program
  • Builder-Lock (BLOCK) Program
  • Energy Efficient Mortgages
  • HomeChoice Program Information
  • Mortgage Insurance
  • Partnership with Southern California Home Financing Authority (SCHFA)
  • Self-Help Builder Assistance Program
  • Single Loan (SL) Process

Down Payment Assistance Programs:

  • Affordable Housing Partnership Program (AHPP)
  • California Homebuyer’s Downpayment Assistance Program (CHDAP)
  • CalHFA Housing Assistance Program (CHAP)
  • Extra Credit Teacher Home Purchase Program (ECTP)
  • High Cost Area Home Purchase Assistance Program (HiCAP)
  • Homeownership In Revitalization Areas Program (HIRAP)
  • Oakland Teacher Program
  • School Facility Fee Down Payment Assistance Program (SFF)

If you are interested in a partnership with the Homeownership Division, call 916.324.8088, 800.789.2432 or visit their website www.calhfa.ca.gov.


Accessing Funds for Rental Assistance Programs

To access funds for rental assistance programs, Housing Authorities respond to Notices of Funding Availability (NOFAs) published in the Federal Register. Each NOFA identifies allocation areas, amounts of funds available per area, and the selection criteria for rating and ranking applications.

Public Housing Authorities are given at least 30 days to submit applications. Interested households apply for assistance through their PHA. A federal program of interest is HUD’s HOME program. It provides grants to state and local governments, which may use them to offer rental assistance. The program’s flexibility allows States and local governments to use HOME funds for grants, direct loans, loan guarantees or other forms of credit enhancement, or rental assistance or security deposits. Visit the HOME Investment Partnership Program page for further information.

Proposition 46 The State of California approved a $2.1 billion dollar bond measure that provides funds for the construction, rehabilitation and preservation of affordable rental housing, emergency shelters and homeless facilities. Proposition 46 has five rental programs. See Table 1.

There are two programs that directly help tenants become homeowners. REALTORS should be aware of these because they constitute valuable tools that renters can use to achieve the dream of homeownership.

Section 8 Public housing vouchers for homeownership: Homeownership vouchers can be used to assist first-time homeowners with their monthly homeownership expenses. Families must meet certain income and employment requirements of eligibility. These vouchers are a solid step to help public housing voucher recipients to become homeowners.

Pay Rent Build Credit: This is a new national credit bureau that tracks rent payments and helps renters build a credit score, thereby overcoming one of the most common obstacles that many renters face: the lack of credit.

REALTORS can participate in any rental assistance program in different capacities:

  • Direct Provider  Develops, administers and manages the program. Activities such as fundraising, publicity, recruiting both tenants and landlords, and screening are part of the daily job. In other words, it requires the creation of a formal rental assistance non-profit organization. This is a time-consuming process that requires a long-term financial and organizational commitment.
  • Partnership with an existing organization  Raising public awareness, fundraising, interviewing, education, financial sponsorship and publicity are some of the forms in which REALTORS can help an existing organization in its efforts to either set-up a new program in the community or support its on-going labor. This has the advantage that limited resources can be used towards a worthy cause.
  • Government Programs Advocate  Championing the use of existing resources towards rental assistance programs and specially those that lead to homeownership. Local officials and housing advocates should be aware of existing financial resources to help renters and use them.

Finally, once the level of participation is decided, REALTORS need to contact any of the following for information, advice or for establishing a partnership:

  • Local shelter organizations. Local groups such as the apartment association, church charities or other housing and homeless support groups.
  • Local housing authority. The city or county housing authority. A very good source for finding the local housing non-profit organizations. They are also the primary source for finding government funds.
  • Local business community. They might be interested in echoing the efforts of a rental assistance program.
  • Local rental organization. Many of these organizations have educational programs.


How to Read Your Settlement and HUD-1

Your Settlement and HUD-1

You can grab the Full 49 Page HUD’s new settlement cost booklet (updated 1/6/2010 with corrections of minor detail)

You have determined what you can afford, found the right house and shopped for the best loan for you. After all the hard work, it is time to go to settlement, but don’t forget to bring your GFE to compare with the charges listed on the HUD-1 Settlement Statement. It is a good idea to review your HUD-1 before your settlement.  Let your settlement agent and lender know that you want to receive a completed HUD-1 at least one day prior to your settlement.


Your settlement may be conducted by your lender or your title insurance company, an escrow company, your attorney or the seller’s attorney.  Regardless of who performs the settlement, there will be many important documents that you will need to sign.  Make sure you carefully read and understand all the documents before you sign them.  Do not be afraid to ask the lender any questions you have about your loan documents.

HUD-1 Settlement Statement

The HUD-1 Settlement Statement (HUD-1) is a form that lists all charges and credits to the borrower and seller in a transaction. You have the right under RESPA to inspect the HUD-1 Settlement Statement before settlement occurs.  When you receive a copy of the HUD-1, compare it to your GFE.  Ask the lender questions about any changes in fees between your GFE and the HUD-1.  Your lender must reimburse you if a closing cost tolerance was violated.

Page 1 of the HUD-1

100 – 300 Series, Summary of Borrower’s Transactions

The first page of the HUD-1 summarizes all of the charges and credits to the buyer and seller.

  • Line 101 is the contract sales price.
  • Line 103 is the total settlement charges from page 2.
  • Lines 106 to 112 lists items you are reimbursing the seller for that were already paid for by the seller, such as property taxes or homeowner association dues.
  • Line 120 is the total of the 100 series section and is the total amount you owe.
  • Lines 200 to 209 contain credits for items paid by you, such as the earnest money deposit and other credits from the seller and other parties.
  • Lines 210 to 219 are credits from the seller for items owed by the seller that are due after settlement.
  • Line 220 is the total of all credits from Lines 201 to 219.  Subtract the amount on Line 220 from the amount on Line 120.
  • Line 303 is the amount you must bring to settlement or the amount you will receive.

Page 2 of the HUD-1

700 Series, Total Real Estate Broker Fees

This section of the settlement statement shows the commissions paid to the real estate agents. There are no corresponding lines on the GFE because the lender does not require this service before you get your loan.

800 Series, Items Payable in Connection with Loan

  • Line 801, “Our origination charge,” lists the lender’s and mortgage broker’s charge for getting you the loan and references GFE Block 1.  In this example, Line 801 designates an origination point of $2,000 for possible tax deductibility.
  • Line 802 lists either the charge for the interest rate (points) or a credit and references GFE Block 2.
  • Line 803 lists “Your adjusted origination charges.”  This amount is the sum of Lines 801 and 802 and references Block A on the GFE.
  • Line 804 is the charge for the appraisal report prepared by an appraiser.
  • Line 805 is the fee for a credit report showing your credit history.
  • Line 806 is the fee paid to a tax service provider for information on the real estate property taxes.
  • Line 807 is the fee paid to the service providing information on whether the property is in a flood zone.
  • Lines 804, 805, 806 and 807 usually reference GFE Block 3.
  • Lines 808 and any additional lines are used to list other third party services required by your lender, including FHA or VA fees.

900 Series, Items Required by Lender to be Paid in Advance

These are charges which the lender requires to be prepaid at settlement.

  • Line 901 lists the daily interest charges collected for the period between the date of your settlement and the first day of the next month.  This charge is disclosed in Block 10 of your GFE.  In this example, the loan closed on 1/31/10, and the interest on the GFE was calculated with a 1/31/10 closing date so the charges are the same on both.  This amount on Line 901 may differ from the amount on the GFE if the settlement date changes.
  • Line 902 lists the charge for any up-front mortgage insurance premium payment due at settlement.  This is one of the charges disclosed in GFE Block 3 of your GFE.  In this example, there is no payment due.
  • Line 903 is the charge for the homeowner’s insurance policy and is one of the charges disclosed in Block 11 of your GFE. In the example, the homeowner’s insurance was paid prior to the day of settlement so the charge is listed as “P.O.C. by borrower”. P.O.C. stands for “Paid Outside of Closing”.  You typically have to bring a pre-paid insurance policy to your settlement.

1000 Series, Reserves Deposited with Lender

This series of the HUD-1 lists the amounts collected by the lender to be placed in your escrow account for future payments of items such as homeowner’s insurance, mortgage insurance and property taxes.  Line 1007 is an adjustment to make sure lenders are only collecting the maximum amount allowed by law.  In this example, even though the first year’s homeowner’s insurance premium has already been paid, the lender has started escrowing money to pay the next bill.

1100 Series, Title Charges

  • Line 1101 lists the charge for all title services and the lender’s title insurance policy.  Title services includes any service involved with providing title insurance, such as title examination, preparing the title commitment, clearing the title to the property, preparing and issuing the title policies and conducting the settlement.  These charges correspond to GFE Block 4.
  • Line 1102 is the amount of the settlement or closing fee if performed by a company different from the one providing title insurance. This charge is part of the charge listed in Line 1101.
  • Line 1103 lists the charge for the Owner’s title insurance policy, if you decided to buy one.  It corresponds to Block 5 of the GFE.
  • Line 1104 lists the charge for the Lender’s title insurance policy which is part of the charge listed in Line 1101.
  • Line 1105 is the Lender’s title policy limit. It often is lower than the value of the property because it only covers the amount of your lender’s lien on your property.
  • Line 1106 lists the Owner’s title policy limit. The liability limit of the owner’s policy is typically the purchase price paid for the property.
  • Line 1107 lists the portion of the title insurance premiums retained by the title insurance agent.
  • Line 1108 lists the portion of the title insurance premiums retained by the underwriter.

1200 Series, Government Recording and Transfer Charges

Government recording charges listed in the 1200 series on the HUD-1 are charges paid to state and local governmental agencies to record important documents such as the deed and mortgage or deed of trust and transfer taxes to legally transfer property.

  • Line 1201 lists all government recording charges and corresponds to Block 7 of your GFE. This represents the cumulative amount the borrower is paying for government recording charges.
  • Line 1202 itemizes specific recording charges for the deed, the mortgage, and any releases of prior liens against your property shown in Line 1201. When the seller pays for an item, such as a release, the charge is listed in the seller’s column.
  • Line 1203 lists the charge for transfer taxes.  Transfer taxes are charged by state or local government to transfer real property or place a new lien (mortgage or deed of trust) on a property. This charge is listed in Block 8 of your GFE.
  • Lines 1204 and 1205 itemize the charges for transfer taxes listed in Line 1203.
  • Line 1206 can be used to list additional items related to recording or transfer charges.

Series 1300, Additional Settlement Charges

Line 1301 is the total of lender required services for which you chose the provider (other than title services). These services are itemized in the lines below 1301. These charges are listed in Block 6 of your GFE.

In addition to services the loan originator required there may be additional services that you chose. In our example, Line 1304 lists a homeowner’s warranty to provide protection for your home’s mechanical systems and appliances. A charge for a pest inspection or survey will appear as a line item in the 1300 series of the HUD-1, if the borrower elected to obtain an inspection or survey that was not a condition of the loan or required by the lender.

Line 1400 is the total of all charges listed in page 2 on the HUD-1 for the seller and you, the buyer.  These totals are also listed on page 1 of the HUD-1.  Your charges appear in Section J, Summary of the Borrower’s Transaction, on Line 103.  The seller’s charges are listed in Section J, Summary of Seller’s Transaction, on Line 502.

Page 3 of the HUD-1

The third page of the HUD-1 is made up of two sections: the Comparison Chart and the Loan Terms. The Comparison Chart will help you compare the charges disclosed on your GFE and the actual charges listed on page 2 of the HUD-1.  The Loan Terms section can assure you that the loan you applied for is the loan you received at settlement.  This section should compare with the “Summary of Your Loan” on page 1 of the GFE.

Comparison Chart

There are three categories in the Comparison Chart: charges that could not increase at settlement, charges that in total could not increase more than 10% and charges that could change.  Compare the charges listed in the GFE column with the charges in the HUD-1 column.  If the charges that cannot increase have increased or the total of the charges that cannot increase more than 10% have exceeded the 10% increase limit, the lender must reimburse you at settlement or within thirty (30) days after settlement.

In the example above, the “Charges That In Total Cannot Increase More Than 10%” were only increased by $70 or 4% and did not exceed the 10% tolerance. For the category “Charges That Can Change” in this example the borrower selected a pest inspection and survey provider that were not on the written list.

Loan Terms

The last section on the HUD-1 clearly sets forth the terms of your loan, including the loan amount, your interest rate and your monthly payments.  It will also disclose the monthly escrow payment account information.  It lets you know whether your interest rate, your loan balance or your monthly payments can increase and whether your loan has a prepayment penalty or a balloon payment. Look at this information carefully and make sure that you are getting the loan and the terms that were set forth in your GFE.

If the loan terms do not match the loan terms on your GFE or if you have questions, contact your lender before signing any documents.

Redevelopment Agencies Set-Asides

To accomplish revitalization of blighted areas Redevelopment Agencies (RAs): make loans to small businesses and non-profit incubators; alter, improve, modernize, reconstruct, or rehabilitate existing structures (commercial, residential, industrial and retail); and engage in other activities geared to the preservation of affordable housing, such as the creation or rehabilitation of affordable and market rate housing. The tax increment is the financial backbone of the redevelopment agency.

As projects are developed and property values increase, the agency retains all of the resulting increase in property tax revenues. Other local governments (e.g., counties, cities, school districts and special districts), whose jurisdictions overlap, receive property tax revenues based on the property values existing before the redevelopment agency was created. The RA takes the tax increment revenue and spends it on infrastructure and other public improvements that facilitate additional redevelopment projects.

State law requires all redevelopment agencies to set aside 20 percent of their tax increment dollars to be spent on programs that increase, improve and preserve the supply of housing for very low-, low- and moderate-income households. If no project is provided within a redevelopment project area, then the funds must be used to build twice that amount elsewhere. Possibilities include financial assistance to upgrade existing units, the construction of new housing, and improvements to public facilities and infrastructure that service low- and moderate-income neighborhoods.

Examples of Affordable Housing Programs offered by RAs:

  • Acquisition, Rehabilitation and Donation of Real Property
  • First-time Buyer Program
  • Post-Buying Counseling
  • Rental Housing
  • Mobile Home Parks
  • Transitional Housing
  • New Construction for Owners and SELF-HELP Organizations
  • New Construction for Rental Families and Seniors
  • Rehabilitation for Owners and Renters
  • Remediation of Soil Contamination
  • Financing insurance premiums during construction or rehabilitation

Development of plans, payment of principal, interest, financing or carrying costs on bonds, loans, advances or other indebtedness to finance low- and moderate-income housing

Although not common, it is possible for RAs to declare exemptions.  Exemptions refer to tax increment agencies allowed an excuse from deposit to the Low-Moderate Housing Fund under specific conditions. Before taking an exemption, the jurisdiction must have an adopted housing element that HCD determined complies with State housing element law.

Also, agencies must annually adopt a resolution making one of the following findings:

  • Community has no need to increase, improve or preserve the supply of affordable housing
  • Less than the required minimum set-aside (20%) is sufficient to meet the community s need
  • Community is making a substantial effort to meet its affordable housing need that is equivalent in value to the set-aside amount (only applies if obligations were incurred before May 1991).

RAs can determine autonomously the housing situation in the community and act accordingly. An agency s resolution, unlike the jurisdiction s housing element, is not submitted to HCD for a determination of compliance. 1

Homebuyer Assistance

RAs have been highly involved in creating small communities of affordable housing. One way to do so is by making land offers to developers who are interested in building multi-unit complexes. The developer must set aside a percentage of the units for affordable housing. Some units will be restricted to either low or moderate-income buyers. If the units are rentals, the holding percentage will be for those who earn less than 100 percent of the median area income.

RAs acquire the land and sell the titles to developers at very reasonable prices so it can replenish its funds to maintain the program. Some of the money from the sale will be set aside to help first-time buyers with silent second loans. RAs also stay very involved in the plan and design of the units to ensure that the complex enhances the area.

Many redevelopment agencies have made good use of their set-aside dollars and have partnered with local housing non-profits to deliver services to the community. The previous list is an example how RAs can put their affordable housing set-aside money to good use. It represents a highlight of the variety of programs to which redevelopment agencies can apply their money.

REALTORS can approach their local redevelopment agency by presenting a concrete housing project. There is no mechanism for joint-participation, so REALTORS would have to approach any staff member and ask him/her for directions on who to contact to make possible the project. This lack of mechanism means that the parts involved have room to work on the project s objectives and delivery, giving opportunity to novel ideas and joint partnerships.

Important Links:

  • List of Redevelopment Agencies
  • Status of Low and Moderate Income Housing Fund: information about redevelopment resources available in your area.
  • Department of Housing and Community Development, Redevelopment Housing Activities in California Fiscal Year 2000/2001, Executive Summary, p. 4.


Take the Stress Out of Home Buying.

Buying a home should be fun, not stressful. As you look for your dream home, keep in mind these tips for making the process as peaceful as possible.

1. Find a real estate agent who you connect with. Home buying is not only a big financial commitment, but also an emotional one. It s critical that the REALTOR you chose is both highly skilled and a good fit with your personality.

2. Remember, there s no  right time to buy, just as there s no perfect time to sell. If you find a home now, don t try to second-guess interest rates or the housing market by waiting longer  you risk losing out on the home of your dreams. The housing market usually doesn t change fast enough to make that much difference in price, and a good home won t stay on the market long.

3. Don t ask for too many opinions. It s natural to want reassurance for such a big decision, but too many ideas from too many people will make it much harder to make a decision. Focus on the wants and needs of your immediate family  the people who will be living in the home.

4. Accept that no house is ever perfect. If it s in the right location, the yard may be a bit smaller than you had hoped. The kitchen may be perfect, but the roof needs repair. Make a list of your top priorities and focus in on things that are most important to you. Let the minor ones go.

5. Don t try to be a killer negotiator. Negotiation is definitely a part of the real estate process, but trying to  win by getting an extra-low price or by refusing to budge on your offer may cost you the home you love. Negotiation is give and take.

6. Remember your home doesn t exist in a vacuum. Don t get so caught up in the physical aspects of the house itself  room size, kitchen, etc.  that you forget about important issues as noise level, location to amenities, and other aspects that also have a big impact on your quality of life.

7. Plan ahead. Don t wait until you ve found a home and made an offer to get approved for a mortgage, investigate home insurance, and consider a schedule for moving. Presenting an offer contingent on a lot of unresolved issues will make your bid much less attractive to sellers.

8. Factor in maintenance and repair costs in your post-home buying budget. Even if you buy a new home, there will be costs. Don t leave yourself short and let your home deteriorate.

9. Accept that a little buyer s remorse is inevitable and will probably pass. Buying a home, especially for the first time, is a big financial commitment. But it also yields big benefits. Don t lose sight of why you wanted to buy a home and what made you fall in love with the property you purchased.

10. Choose a home first because you love it; then think about appreciation. While U.S. homes have appreciated an average of 5.4 percent annually over from 1998 to 2002, a home s most important role is to serve as a comfortable, safe place to live.

Reprinted from REALTOR magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS .
Copyright 2008. All rights reserved.

Community Development Block Grants (CDBG)

Community Development Block Grants (CDBG) provide annual grants on a formula basis for many different types of grantees.

The programs covered under this designation are: Entitlement Communities, State Administered CDBG, Section 108 Loan Guarantee Program, Colonia, HUD Administered Small Cities, Insular Areas, and Disaster Recovery Assistance. From all of these programs, only the first two provide important funding opportunities for the development of housing and housing programs.

Entitlement Communities
CDBG provides eligible metropolitan cities and urban counties (called “entitlement communities”) with annual direct grants that they can use to revitalize neighborhoods, expand affordable housing and economic opportunities, and/or improve community facilities and services, principally to benefit low- and moderate-income persons. To receive its annual CDBG entitlement grant, a grantee must develop and submit to HUD its Consolidated Plan, (which is a jurisdiction’s comprehensive planning document and application for funding under the following

Community Planning and Development formula grant programs: CDBG, HOME Investment Partnerships, Housing Opportunities for Persons with AIDS (HOPWA), and Emergency Shelter Grants (ESG)). Entitled communities are responsible for developing their own programs and for setting their own funding priorities. Grantees must give maximum feasible priority to activities which benefit low- and moderate-income persons.

CDBG funds may be used for activities which include, but are not limited to:

  • Acquisition of real property
  • Relocation and demolition
  • Rehabilitation of residential and non-residential structures
  • Construction of public facilities and improvements, such as water and sewer facilities, streets, neighborhood centers, and the conversion of school buildings for eligible purposes
  • Public services, with certain limits
  • Activities relating to energy conservation and renewable energy resources
  • Provision of assistance to profit-motivated businesses to carry out economic development and job creation/retention activities.

Funds are received by entitled communities, which post a Notice of Funding Availability (NOFA), through their housing and development department or their city council, and grant proposals are requested. After a series of hearings and evaluations of the grant proposals, funds are awarded to the final recipients. These are generally non-profit agencies that have submitted projects deemed to be of great social value for the community.

Projects submitted for evaluation have to meet general funding criteria and specific funding criteria (Economic Development, General/Native American/Colonias Enterprise Fund and Planning and Technical Assistance ).

When evaluating who should receive funds and on what amount, entities place a high value on: number of people serviced per dollar, addressing a local need, and efficient distribution of human and material resources. Other factors also impact funding, such as competing agencies already providing the service proposed or total number of proposals submitted (some localities like to fund as many as possible, thereby diminishing the amount allotted to each grantee).

The final allocation process is a competitive one, usually there are several agencies competing for a limited amount of money. However, some localities either do not promote effectively the availability of CDBG funds or potential grantees are not aware of their existence, leaving in the coffers of local governments thousands of dollars. This money has to be returned, by the end of the period, to the State. REALTORS should inquire with their local governments about the availability of CDBG funds. Local or municipal housing or economic development officials should be able to furnish information of CDBG funds availability.

  • Open CDBG Grants, see the manual for supported activities.
  • 2004 CDBG budget allocation for California (includes the counties, cities and municipalities not in the State CDBG funding Allocations list). In the same page, links to 2001, 2002 and 2003 budget allocations.
  • California Entitlement List of Contact by City, County and Town

State Administered CDBG

The California State CDBG program has as its objective to develop viable communities by providing decent housing and a suitable living environment and by expanding economic opportunities, principally for persons of low- and moderate-income.

Grants are only awarded to non-entitlement areas which include those units of general local government which do not receive CDBG funds directly from HUD as part of the entitlement program (Entitlement Cities and Urban Counties). Non-entitlement areas are cities with populations of less than 50,000, and counties with populations of less than 200,000, although some entitlement cities have a population of less than 50,000 (cities that are designated central cities of Metropolitan Statistical Areas). The State CDBG program has replaced the Small Cities program in states that have elected to participate.

Annually each state develops funding priorities and criteria for selecting projects. Each year the program makes funds available only to eligible jurisdictions (non-entitlement areas) through several allocations: General and Native American, Economic Development, Planning and Technical Assistance, and Colonias. Notices of Funding Availability (NOFAs) are published for each allocation as the funds become available.

Successful applicants enter into contracts with the State to complete the specified activities with the grant funds. The Department of Housing and Urban Development (HUD) transfers federal funds to the State of California’s Department of Housing and Community Development (HCD). Funds allocation is typically announced by HUD in late February, and it awards the funds to the State in May of each year. Under State statute and regulation, HCD allocates the federal CDBG award into various program components. Once the State receives the funds, it distributes them to eligible jurisdictions, i.e. counties, cities and towns, for their use. One of the requirements to receive a grant is to have submitted a housing element to HCD*. Funds cannot be denied to an entity because of the findings made by HCD regarding the element.

However, Section 50830 of the California Health and Safety Code states that if the city or county has adopted a general plan, ordinance, or other measure which directly limits, by number, either the buildings permits that may be issued for residential construction or the buildable lots which may be developed for residential purposes, then the entity becomes ineligible to receive funds. The flow chart prepared by HCD succinctly describes the allocation process.

If the state finds a jurisdiction to be non-performing, it disencumbers the funds previously awarded and rolls them over to a similar program within the other State eligible jurisdictions. Programs elected for the rollover are selected from the waiting list. Programs are placed, according to ranking, in a waiting list either because they couldn t be fully funded or because they were not funded at all. Since the program s award grant in a sense is lost for the community for that funding cycle it is important to monitor the performance of the local government.

  • State CDBG Funding Allocations Packages, information on NOFAs: general and specific funding application packages.
  • State CDBG Rep List by County (Adobe PDF) All listed numbers are area code 916.
  • State CDBG Rep List by Program
  • CDBG Information, use this page to learn about late-breaking news and to view copies of the most recent Program publications. Information is updated monthly or as needed.
  • State CDBG 2003 General Allocation Funding List (Excel file provided by HCD)
  • State CDBG 2003 General Allocation/ 2nd Rollover Funding (Word file provided by HCD)

Section 7056 (b)(1) of Title 25 of the California Code of Regulations, and Section 50829 California Health and Safety Code.


Secondary Mortgage Market

Conventional financing assistance and loan programs are offered by private lenders, non-profit organizations, savings and loan institutions, credit unions, commercial banks, mortgage banking companies and state and local housing finance agencies. These lenders, the originators of loans, are also called primary lenders.

By extension, the primary mortgage market is the place where loans originate and are issued directly to the homebuyer by primary lenders.

After issuing loans to homebuyers, primary lenders have the option to keep it in their portfolio or to sell it to the secondary mortgage market in order to replenish their funds and have more money available to issue new loans. The secondary mortgage market includes investors and financial companies, pension funds, housing GSEs (Government Sponsored Enterprises) and other financial agents.

The Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) are the two GSEs that purchase loans from the primary lenders. Their purpose is to support homeownership. They replenish primary lenders funds and support their financial activity so that lenders have money available for more mortgage loans.

Fannie Mae and Freddie Mac do not lend money directly to homebuyers. Instead they fund several of the affordable financing programs in place in the mortgage market and publish a number of educational materials for the public, in some instances in other languages than English, to provide consumers with the necessary tools to become knowledgeable in the home-purchasing and home-owning process.

The loans issued through their sponsorship are called conforming loans because the primary lender drafts the loan according to the secondary purchaser s terms. Their loans are designed to help people become homeowners in spite of the challenges they face, such as coming with a down payment or having credit problems.



There are many factors to take into account when trying to choose the right home. After you ve settled on a price range that you can afford, start asking yourself some questions:

  • What part of town do I want to live in In an urban area Near good schools (Are you single, partnered, partnered with kids )
  • Is a big house more important than location
  • How many bedrooms do you need/want Bathrooms Other amenities
  • Do you want a new home A used home A condominium A fixer-upper

Other things to consider: Are you very tolerant to loud neighbors or un-kept houses If you answer  yes, you should have no problem finding a great deal on a home. A problem may arise, however, when you attempt to sell the home. While making yourself happy with your new home, keep in mind that one of these days you may want to try and make someone else happy with it!

Choosing what part of town to live in is mainly based on your lifestyle. If you re single and enjoy a very active lifestyle, living in a quiet, tree-lined neighborhood close to good schools may not be too important to you. On the other hand, if you have three small children, living in a singles condo complex might be a poor choice  or at least make you unpopular with your neighbors!

Pay attention to the quality of the neighborhood in which you are looking.  Pride of ownership shows through in how well yards and homes are maintained. If dead lawns and over-grown shrubs are the norm, you may want to think twice before buying there.

True, you might get more house for the money, but in the long run, you may have trouble re-selling it.

Think about what is going to make your home livable: bedrooms with bathrooms a removed master bedroom a two car garage a gourmet kitchen a large yard a small yard You should write up a wish list, then start looking at what is available in your price range. From there, you can whittle the list down to what you really want and what you can live without.

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Daniel Andrade, REALTOR® DRE #: 01849983
Century 21 My Real Estate Co
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