This new disclosure rule simplifies home closing with two new forms. Here's what info your mortgage lender must give you and when.
Good mortgage lenders are key in the home buying or building process, especially under the Real Estate Settlement Procedures Act (RESPA).When deciding to buy or build a home anywhere in the U.S. based on the new regulations that went into effect in October 2015, your mortgage lender will be one of the most important people on your team. So choose mortgage lenders wisely.
What does TILA-RESPA mean for me?
You’ll want a mortgage loan officer who’s trained and knowledgeable about the new Truth in Lending Act’s Real Estate Settlement Procedures Act, also known as the TILA-RESPA integrated disclosure rule or TRID, and Consumer Finance Protection Bureau changes that took place in 2015. This new rule applies to all loan applications dated on or after Oct. 3, 2015.
The RESPA rule will transform both the mortgage and settlement process!
It was ultimately created to protect the consumer/buyer (hence the CFPB’s involvement) and to simplify the forms, so homebuyers know exactly what to expect at home closing at least three full days before they close on the property. This means no more last minute numbers or info.
The rule applies to most mortgages, except: home equity line of credit (HELOC), reverse mortgages and mortgages secured by a mobile home or dwelling not attached to real property.
New mortgage loan discloure forms
Buyers will now receive two streamlined documents under the new rule.1. Loan Estimate (LE): This form must be delivered or placed in the mail no later than the third business day after receiving the consumer's application. This form replaces what you might have known as the “Good Faith Estimate.”2. Closing Disclosure (CD): This form must be provided to buyers at least three business days prior to closing. The closing disclosure form replaces the former “HUD-1 Settlement Statement” that was complicated for most consumers to understand.
Why good mortgage lenders matter
Two forms sounds pretty simple, right? Yes — if your lender is well versed in the new rules and regulations!
Not all loan officers function the same or receive the same training. Again, you’ll want to choose a mortgage lender who’s educated on the new process because it involves a lot of behind the scenes steps while they work to secure your loan and finalize all the details without delay.
If not proficient with TRID, your lender could cause delays in the home closing and create a frustrating experience for you as the borrower/buyer.
How to navigate the home loan process
Here’s what you can do to be proactive and avoid home closing delays or problems:
• Consult with your loan officer to be sure they have a game plan and know how to execute the loan under the new TRID rules.
• Determine how you’ll reference your name/signature. While this sounds trivial, you want to use the same name on the home contract and loan paperwork to avoid delays and confusion later in the process. It’s best to use full names, so avoid using "Tim" or "Jenny" if your name is Timothy or Jennifer.
• Provide any documentation needed for loan processing as soon as possible. And once you receive the executed Closing Disclosure form you must read through and acknowledge it with an e-signature in the timeframe provided by the mortgage loan officer to avoid delays in closing.
• Avoid last minute changes or negotiations. This means, you’ll want to schedule a walk through of the home you’re buying early in the process, not at the end right before closing.
Mortgage lenders are now responsible for a much bigger portion of your home buying or building process, and you’ll want to have the best experience when working toward achieving this big milestone.
So do your homework when choosing a lender and use this as a point of reference to select the right person for your team!
Buying a house? Before you find your dream home, use our hiring guide to find the best local real estate agent.
About this Experts contributor: Tara Bebinger is a full time Realtor at Keller Williams Consultants in Dublin, Ohio. Tara and her husband, Tim Bebinger, sell about 50 to 70 homes per year as real estate agents near Columbus, Ohio. They know first hand how important teaming up with a good Realtor and mortgage lender are in the process of selling and buying real estate.
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