What is RESPA ?

The Real Estate Settlement Procedures Act (RESPA) contains information on the settlement or closing costs you are likely to face. Within 3 days of the time you apply for the mortgage, your lender is required to provide you with a "good faith estimate of settlement costs," based on his or her understanding of your loan. If this is a purchase transaction, this estimate should give you a good idea of how much money you will need at closing to cover pro-rated taxes, first month's interest, and other settlement costs. If this is a refinance transaction, it will detail all the closing costs associated with the loan. Generally, when you refinance your home all closing costs are rolled into the loan, so you will not need to bring any money to the closing.

The act also requires lenders to give you an information booklet, Settlement Costs and You, written by the U.S. Department of Housing and Urban Development, which discusses how to negotiate a sales contract, how to work with various professionals (attorneys, real estate agents, lenders), and your rights and responsibilities as a home buyer. It also shows an example of the uniform settlement statement that will be used at your closing.

One business day before you close, you are entitled to see a copy of the Uniform Settlement Statement with your figures on it so you will know just how much the final costs will be.