What percentage of people going through the loan process know these terms well enough to be able to describe them?

Good Faith Estimate?
Points?
Margin?
Due on Sale?
APR?
APY?
HUD-1?

I assure you that the number isn’t very high.

Getting approved for a mortgage is a breeze, compared with what comes afterwards. You’ll be required to sign a huge stack of papers (most of which will be unfamiliar), under pressure, with an attorney (and maybe a spouse) waiting.

You’ll see names like “Good Faith Estimate,” “Truth In Lending Disclosure,” “Promissory Note,” “HUD-1,” and others with tongue-twister names.

Will you understand what you’ve signed? Can you even describe the terms of your loan? These questions are asked a lot with the subprime meltdown, but it seems as if nothing has changed. Borrowers still don’t know or understand the important parts of their loans, or aren’t told important bits of information until the last moment.

A good lender will make sure that you understand the rules governing the loan(s) you are considering. But there is a movement afoot to require lenders to disclose all of the relevant details on a new disclosure form. As expected, lenders don’t like this. They claim that obligating more disclosure simply means more paperwork for the borrower to complete - and not necessarily more understanding. But, it may become the law of the land before long.

Legally speaking, full disclosure ought to be the law. But at Price & Company Realty, we believe that it is our responsibility as Realtors to make sure you fully understand all of the terms and conditions — and consequences — of the loan you are considering. Full disclosure does not often translate into full understanding.

For example, “APR” – annual percentage rate - as it is disclosed today, is expressed as an aggregate number that includes all up-front charges, supposedly so that you can fairly compare one lender to another. But I have yet to meet anyone who “gets” it. In my experience, nobody actually uses true APR while searching for mortgages. They think that they are able to compare “rates” but that almost never includes any of the fees charged by lenders.

And I have yet to go through a Myrtle Beach real estate transaction where the settlement statement (”HUD-1″) is offerred by the closing attorney 24 hours in advance, as is supposed to happen. (I’m not blaming the attorneys, by the way. In this day and age of instant electronic document delivery, lender s often don’t deliver the closing package to the attorney until the morning of closing!)

For the record, we go through every part of the Good Faith Estimate, and HUD-1, with our clients, in advance, to make sure that everything is in order, before closing.

It’s just one more way we protect our clients (sometimes from themselves).