When you buy a new home as of October 1, your lender will be required to provide you with more detailed mortgage rate and fee quote documents per the TILA-RESPA Integrated Disclosure Rule (TRID). And they must provide more time for you to review these documents before you close on your home.

Known as the “Know Before You Owe” regulations, the Consumer Financial Protection Bureau (CFPB) hopes to prevent bait-and switch lending practices that were common a decade ago.

Currently, when you finance a home, you’re protected from paying higher fees through two regulations:

• The Truth in Lending Act (TILA or Regulation Z) which standardizes how mortgage terms and fees are calculated and disclosed.
• The Real Estate Settlement Procedures Act (RESPA or Regulation X) which prohibits lenders, real estate agents, title companies, escrow companies, attorneys and insurance companies from paying customer referral fees to each other.

Today, when you get a mortgage loan, you receive two sets of disclosures:

• At the beginning of the loan process, your lender must give you a Good Faith Estimate and an Initial Truth in Lending disclosure. These documents provide you with the quoted rate, the fees you will pay, the terms and costs over the life of your loan.
• Before closing (often the day of closing), your lender must provide you with a HUD-1, which breaks down all of the transaction fees and summarizes the final cash amount needed to close. Additionally, you must receive a final Truth in Lending disclosure that you can compare with the initial one.

However, since these current disclosures were deemed too confusing and didn’t allow borrowers to make any changes (since they received the HUD-1 at closing), the CFPB is combining them into two easier-to-understand forms effective with all new mortgage applications on October 1.

• Within 3 days of applying for your home loan, your lender must send you a Loan Estimate Form, which provides a detailed breakdown of all fees, the cash needed to close as well as the rate, terms and costs over the life of the loan. Your lender will also be required to obtain your approval before they can move forward with the loan application process.
• At least 3 days before closing, your lender must provide you with a Closing Disclosure Form, which is similar to the Loan Estimate, but also details the costs paid by the buyer, seller and third parties. Therefore, you’ll have more time to review the document.

For more information on what these new disclosures mean to borrowers, check out this link.

If you’re looking to purchase a new home or refinance an existing home, contact the mortgage specialists at Grandview Lending at 317-255-0062. Our business is built on providing you with old-fashioned personal service based in honesty, integrity and sincerity. Let us help you take the stress out of the loan process.

Photo credit: Free Digital Photos / Imagery Majestic