Buying a home

New guidelines change the loan process

Oh no, not a dry article about getting a loan.  I promise to keep it short, and lay out the important changes to Truth in Lending Act and Real Estate Settlement Procedures Act. Yes, the government that brought you regulations to govern your purchase of light bulbs, the EPA and Obamacare has actually brought a new regulation that may actually be helpful!  But it may take some getting used to.

There is evidence to support that borrowers who are not presented with clear and understandable information about their mortgage loans may not understand the risky business of taking out a home loan.

In leading up to the financial crisis, many consumers took on loans that they could not afford, and confusion about terms (when your adjustable rate mortgage adjusts sticker shock for example) piled on the risk. To add even more confusion,  mortgage lenders would provide two different documents, the early Truth in Lending Statement and a Good Faith Estimate.  At closing the title company provides a final Truth in Lending and HUD-1 Statement.  Four different documents from two different agencies with overlapping information.

Starting August 1, 2015 here are a few of the changes: loan-40681_1280

  • The Good Faith Estimate and Truth in Lending documents will be replaced by a Loan Estimate document which provides a summary of costs easier to read and comparison shop with other lenders loan terms.
  • Risk factors, short and long term costs and monthly payment schedules will help the consumer understand their financial responsibilities.
  • The HUD-1 and Final Truth in Lending documents which could be delivered at closing are now replaced by a Closing Disclosure that is required to be delivered to the borrower three business days before the closing.
  • No more “gee Honey, I have no clue what all this legalize is all about, and it looks like the numbers we were counting on have changed.  But here we are, minutes away from getting our keys.  Let’s just sign and get on with it.”
  • More time to consider choices, and integrating the new procedures may make the quick close when financing is involved a thing of the past.  Seller and buyer be warned and be patient.
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