As of January 1, 2010 it has become easier to compare home loans using the first industry-standardized good faith estimate (GFE) created by The U.S. Department of Housing and Urban Development. With the new form home buyers are able to cost compare mortgage loans with different lenders.

Finding the lowest-cost home loan is not an easy job by any means for home buyers.  For example: What's the difference between a lender processing fee and a document fee? What's a yield spread premium and how does it affect how much mortgage costs? In other words the same fee could have different names.

"The problem in the past," says Brian Sullivan, a U.S. Department of Housing and Urban Development, or HUD, spokesman, "was that there was no standard good faith estimate."

The new form standardizes that information. The terms of the loan are also made clear on the new form whether it is a fixed rate or adjustable; if there is there a prepayment penalty; or can the loan balance rise?

The new GFE is a potential money saver as well for potential home buyers. HUD estimates that borrowers will save an average $700 per loan, according to the report "Regulatory Impact Analysis and Initial Regulatory Flexibility Analysis." However, higher appraisal costs may make that figure lower.

"This new GFE will hold the loan originator's feet to the fire so consumers can be fully educated about which loan they're applying for," says Sullivan.

Here are some tips for home buyers in using the new GFE to shop for a loan.

1. Compare same items.

Lending rates change on a daily basis. "Shop lenders on the same day and even the same time," says Benjamin Clark, a broker with home buyer Representation in Salt Lake City. "Rates can change between Monday and Thursday. Tell them you need their best quote as of noon Eastern on a specific date."

Specified on the new GFE for home buyers is the interest rate, points being paid for that rate and the terms of the loan. "Are you comparing a 30-year fixed loan with a 15-year fixed loan? If so, you're not comparing apples to apples," says Davis.

2. Accurate information must be provided by the potential home buyer to give an accurate view of loan costs.

"In order to efficiently navigate through a purchase transaction, a consumer needs to get prequalified and determine what he or she can purchase," says Jay Ralstin, a residential loan originator with Premier Bank in Tallahassee, Fla. Be honest about your income and expenses. "Your rate and fees are based on data," says Alex Castellanos, a governor for the Mortgage Bankers Association of Florida and a loan officer with SunTrust Mortgage in Miami. "If you give me accurate information, then it works. Be honest with yourself; figure out your expenses and your income."

The new GFE also requires a three-day waiting period before closing on a loan if certain costs have changed then a new GFE has to be issued.

3. Use the loan comparison shopping chart.

"This is a great tool for people to do a side-by-side comparison of all the key characteristics of the loan," says Sullivan. On Page 3 of the GFE, a chart allows you to compare four different loans for total cost. "You can go line-by-line and fill in the loan amount, loan term, interest rate and more to find out what each lender is charging," says Davis. GFEs did not detail this information in the past.

4. There is more than just the interest rate.

"You have to look at interest rate and then at fees," says Davis. "Just because a broker offers a lower interest rate than others doesn't mean it's the best deal if that particular broker is charging more in fees."  There is just a single line for all settlement charges on the new form vs. the previous 50 lines which would include duplicate charges  with different names.

Service is also very important.. "Sure, you'll see the interest rate and whether or not you have a prepayment penalty, but you won't see the intangibles," says David Doerr, a mortgage consultant with Wells Fargo Home Mortgage in Salt Lake City. "Will this loan officer give me the best service? Has he or she been in business for a long period?"

Castellanos adds, "A loan officer who provides outstanding service will tell you everything you need to know, in layperson's terms, about the loan you choose, including whether or not there's a balloon payment or an adjustable interest rate. The new GFE only confirms that information."