Banking regulations shaping property condition disclosures
New banking regulations will change the closing process for properties buyers.
All mortgage lenders are required to use new consumer disclosure forms effective on Oct. 3, 2015. The changes merged the HUD-1 Settlement Statement, the Good Faith Estimate, and the Truth-in-Lending disclosure form into two new closing forms: a Loan Estimate and a Closing Disclosure.
Consumers will have more time to review the total costs of their mortgage prior to closing. The Loan Estimate form is due to consumers three days after they apply for a loan. The Closing Disclosure form is due three days prior to closing. A borrower can use the Loan Estimate form to find the following information:
- loan amount and interest rate
- the borrower’s monthly payment
- estimated taxes and insurance
- cash required to close
In general, the mortgage rate and closing costs shown in the Loan Estimate should be the same as the Closing Disclosure. One of the notable reasons that the lender charges the borrower an amount higher is when a changed borrower or mortgage circumstance permits the cost to increase.
Potential loan process delays to note
Borrowers will face delays to closing if there are any last-minute changes with the financing of their loan. For example, if borrowers decide to change loan products at the last minute – such as switching from a fixed-rate mortgage to an adjustable-rate loan – borrowers will face a three-day delay in the closing to allow for reviews of the new Closing Disclosure form. Most notably, borrowers will not have a choice to waive the three-day review period.
Some mortgage experts are recommending that borrowers lock in their mortgage rates 45 or 60 days. This is a change from the more common 30-day lock, in case there is any delay in closing.
“Know Before You Owe” Resources
This information was compiled by realtor.com.