How will the new mortgage rules affect my closing?
On October 4, 2015 new federal disclosure rules went into effect that require lenders to provide home buyers with two new, more detailed forms that spell out their loan terms. While there are some concerns associated with the new rules, this should be good news to most buyers.
The rule (known as the TILA-RESPA Integrated Disclosure) reduces four forms from two separate government agencies to two forms: the Loan Estimate form and Closing Disclosure form.
First, lenders must provide a loan estimate form within three days of the loan application. You can find that here.
This basic form spells out the details of the loan: amount, interest rate and other variables that may change after closing. The form also spells out all closing costs related to the loan.
The benefit to the buyer is the ability to compare different loans from different lenders and see the projected costs and payments of that loan. Keep in mind factors like variable rate loans and pre-payment penalties.
Next, the lender must provide a closing disclosure form three days prior to closing (found here). This gives the borrower ample to time to ensure nothing has changed from the loan estimate and eliminates last minute changes and fees at the closing table.
That’s the good. Now the concerns.
Given the three day requirement, last minute negotiations (like repairs and contingencies) cannot take place anymore. These issues must be ironed out well in advance, otherwise delays in the closing will take place. Some critics of the new law worry that longer closing times will be the new norm.
From an real estate brokers standpoint, we worry most about buyers who are also selling a property and the impact the new rules will have on the already difficult task of timing both closings together.
Best advice we can give…prepare for delays, have all your paperwork ready before starting the process and possibly spending the extra money for a longer lock term.
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