Raleigh Home Buyers – “Know Before You Owe”: How New Rules Could Impact Closings

house icon on grassIf you’re a home buyer, changes to the closing process are coming in just a few days.

New regulations go into effect on Saturday, October 3rd, providing new loan disclosure forms that are designed to help you better understand the terms of your home mortgage before you close on your new home. That means if you apply for a loan on or after that date, you will receive the new,  easier-to-understand forms.

 

What You Need to Know About the New Closing Disclosures

The new rules combine mortgage loan disclosures from both the Truth-In-Lending Act (which informs consumers about loan terms) and the Real Estate Settlement Procedures Act (which deals with closings) into a single set of disclosure forms for home buyers who are obtaining a mortgage.

The official title to these regulations is a mouthful — Truth-In-Lending Act / Real Estate Settlement Procedures Act Integrated Disclosure Rule— so the regulations are just referred to as TRID. (The enforcement agency, the Consumer Financial Protection Bureau, also calls it Know Before You Owe.”)

“Know Before You Owe” is designed to help borrowers clearly understand the costs and terms of their home mortgages. Here are the changes you can expect as a result of these new regulations, from the number of forms you’ll need to fill out to the time requirements that can delay your closing date.

You’ll Have Two Forms Instead of Four

If you’re getting a mortgage, you’ll receive two forms under “Know Before You Owe.” The first, a loan estimate, based on your financial information. You’ll receive the loan estimate 3 business days after applying for your mortgage. The second, a closing disclosure, which outlines all of the costs you will need to pay. You’ll receive that form 3 business days before closing.

These two new forms are more user-friendly, and are replacing four separate forms that home buyers received before — two Truth-In-Lending statements, the loan estimate, and a list of itemized fees.

With these new regulations, you will have time to review the terms of your mortgage well before closing, so you can understand exactly what fees are being charged. You can read the Consumer Financial Protection Bureau’s full guide to the loan estimate and closing disclosure forms here.

There is a 3-Day Review Period Before Closing

Under the new “Know Before You Owe” rules, mortgage lenders must send you easier-to-understand information about your loan — the Closing Disclosure form — 3 business days before closing on your home, giving you time to review the terms of your mortgage.

However, some changes to the mortgage terms — like changes to your interest rate or the loan product (type)  — will mean that you will need another 3-business-day review period, possibly delaying your closing date. If you would like an overview of the details, the CFPB highlights the instances where the 3-day review period would be affected.

Capital City Real Estate Group in Raleigh

We Can Answer Your Questions About “Know Before You Owe”

If you are buying a home and have questions about these new regulations, and what it might mean for closing on your new home in the future, contact the Capital City Real Estate Experts today and we will be happy to answer all of your questions.