As a Real Estate Broker, people often ask me to explain the mortgage process to them as it is typically a fundamental part of the real estate buying process. This past month, several changes have taken place in the mortgage industry that have several people confused as to how these amendments affect their ability to obtain a loan. While I cannot explain the mortgage process as well as a mortgage broker, I would like to shed some light on the topic, and provide you with some insight on the subject.
The finance industry is as ever-changing as the real estate market. Mortgages, in particular, have undergone significant changes, better known as TRID (TILA/RESPA Integrated Disclosure), which have gone into effect as of October 3. These new rules pertain to all residential real estate transactions that have been entered into contract either on or after this date.
For over 30 years, Federal Law has mandated that lenders provide two different disclosure forms to people applying for a mortgage, as well as two different forms for the closing of the loan. These forms were developed under two federal statutes: The Truth in Lending Ace (TILA), and the Real Estate Settlement Procedures Act of 1974 (RESPA), which led to the information overlapping and the language being inconsistent. The purpose of the new guidelines is to consolidate the four disclosures required under TILA and RESPA into only two forms: a Loan Estimate, and a Closing Disclosure. The purpose of the Loan Estimate form is to provide disclosures that will help consumers to better understand the key features, true costs of financing, and risks of the mortgage loan for which they are applying. This document must be placed in the mail no later than three business days after the consumer’s application is received. The Closing Disclosure form is designed to provide insight, which will enable the consumers to understand all the costs of the transaction. This document must be made available to the consumer at least three business days prior to the completion of the loan.
Along with the introduction of these forms come several changes of which consumers should be aware:
1) A rate must be locked in at least seven days prior to closing.
2) If a closing disclosure needs to be amended in any way, there will now be a mandatory three day waiting period.
3) A closing disclosure may need to be corrected if there is a change in the terms of the loan, if a Fixed Rate Mortgage needs to be changed to an Adjustable Rate Mortgage (or vice-versa), if there is an increase in the Annual Percentage Rate greater than 0.125%, or if the title fees increased after the closing disclosure was initially approved.
I understand that any deviation from the previously accepted way of doing things can be intimidating, but these amendments are designed to make the consumer’s life easier, and should not deter you from buying or selling real estate. My agents are aware of these changes to the mortgage industry and can help guide you through the entire process of buying and selling real estate. Please call or visit my office to find the agent right for you.