December 4, 2015 - Buying a home is a major decision, and it's also one that can wind up being more than a bit confusing considering the paperwork involved in making an offer, performing your due diligence and, finally, closing on your property. Fortunately, some of that confusion was eliminated this year with the recent introduction of the “Know Before You Owe” rule from the Consumer Financial Protection Bureau (CFPB). More formally known as the TILA-RESPA Integrated Disclosure rule, or TRID, Know Before You Owe was designed to make the mortgage loan process more straightforward for consumers by streamlining the forms involved in mortgage loan processing and also defining the timing sequence for when borrowers must receive and review the forms.
The New Forms
Under the new rule, the old Good Faith Estimate, Truth in Lending and HUD-1 forms are out. Instead, borrowers will receive two simplified documents – the Loan Estimate and the Closing Disclosure – that make it easier to understand the fees they'll incur during the mortgage loan process. The documents include important financial information, like the monthly mortgage payment, interest rate, closing costs and other important information related to the mortgage loan. By simplifying the forms used to convey this information, consumers can make more informed decisions about the mortgage loan selection process as well as ask questions about fees and costs they may not understand.
The New Timeline
New documents are just one part of the changes under TRID. The rule also includes a new timeline that mandates when forms must be provided to borrowers as well as other steps in the mortgage loan process. Under the new timeline:
- The Loan Estimate form must be provided to the borrower within three business days of the loan application.
- The Closing Disclosure must be provided to the borrower at least three business days prior to the closing date.
- The borrower must have an additional three business days to review an amended Closing Disclosure if the lender makes any changes to the annual percentage rate of the loan or to the loan product, or if a prepayment penalty is added to the loan after the initial Closing Disclosure is provided to the buyer.
- There must be at least seven business days between the time a borrower receives the Loan Estimate and when the Closing Disclosure is provided to ensure ample time for the borrower to review all the forms and ask questions.
What does all this mean to you as a home buyer?
First, it means it will be easier to understand the financial implications of owning a home and taking out a loan on that home. It also means you need to be mindful of the timeline in order to keep the process moving forward as smoothly as possible. To stay on track, the Mortgage Bankers Association (MBA) offers these tips:
- Provide your lender with documents as soon as possible to speed up the loan approval process.
- Read the Loan Estimate and Closing Disclosure as soon as you receive them so you have plenty of time to ask questions.
- Inform your lender about any changes or issues that may come up during the inspection period that could have an impact on your loan or the final Closing Disclosure.
- Be aware the new process could cause slight delays while lenders and other parties get “up to speed.”
Questions? Talk to your local Bremer mortgage loan officer or call 800-908-BANK (2265).