New Mortgage Rules Coming Soon!

Posted on Monday, July 20th, 2015 at 4:57pm.

New Mortgage Rules Coming October 1st

Securing a home loan can be one of the most confusing and tedious parts of buying a home. Starting October 3rd, the Consumer Financial Protection Bureau (CFPB) will roll out a new set of rules governing the mortgage process. The "Know Before You Owe" mortgage rule will change the way home loan information is presented to the buyer. Get an overview of how the Know Before You Owe rule will affect Austin home buyers.

In the current mortgage process, lenders are required to provide both Truth in Lending and Real Estate Settlement Procedures Act disclosures to home buyers. These two documents outline important loan information a home buyer needs to know before closing on a home. Under the new Know Before You Owe rule,  these two documents will be replaced by the new Loan Estimate form and Closing Disclosure form. The lender is required to provide the Loan Estimate form three business days after a home buyer applies for a mortgage. This form includes details about the home buyer’s total loan amount, interest rate, monthly payment, and other important information. The new Loan Estimate form makes it easier for home buyers to compare loan amounts and rates from different lenders.

Three business days before the scheduled closing date, the lender must provide the Closing Disclosure form. This form includes all the loan information agreed upon by the home buyer and lender, as well as a detailed summary of all closing costs. The closing costs summary shows the amounts for all associated fees and costs of purchasing the home, as well as whether the buyer or seller is responsible for paying those amounts. Presenting a detailed overview of all costs three days before closing gives home buyers and their agent time to revise any mistakes or issues with the home loan. However, if any changes need to be made to the loan, new forms will be issued and a new three day waiting period will begin. Only three changes require a new three day waiting period- a change in annual percentage rate (APR), an added or revised prepayment penalty, or a change to the loan type (for example, from fixed rate to adjustable rate). Any other changes, like adjusting closing payments, will require an updated Closing Disclosure form, but do not require a new three day waiting period. Since changes that require the lender to reissue the Closing Disclosure form can delay your closing, talk to your lender and Realtor about how to avoid making changes that will require a new three day waiting period.

Overall, the Know Before You Owe rule is designed to help home buyers better understand their mortgage and make informed decisions about their home purchase. Our friends Brad Compere of Capstone Title and David Cockrell of Supreme Lending agree that since the new rules require working closely with a lender, it's important for home buyers to work with a local lender they trust and has strong working relationships with local title companies. If you're considering buying a home after October 3rd, talk to your agent or lender about how the new rules will affect your purchase. The Consumer Financial Protection Bureau has also created a Home Loan Toolkit to help buyers understand the new rules and forms. Our agents are happy to answer any of your questions about buying or selling homes in Austin- contact us today!

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