The homebuying process is filled with acronyms. From "FHA" to "HUD" to "LTV" (which sounds more like a channel than a mortgage term), buyers encounter unfamiliar financial jargon, organizations, and rules throughout the process of finding a new home. August 1st, however, will bring new changes to this industry that both simplify and extend the process of securing a home loan and closing a sale. Here are the three things you should know before diving in!
I am advising my clients who have closing in the first week of August to get all parties together and agree to close prior to the TRIAD enactment.
If you are a top realtor or mortgage professional and have closings on or near August 1st you need to prepare your clients now; there will be delays if you are working with any party who does not understand these changes.
- Joel Schaub - Vice President of Mortgage Lending at Guaranteed Rate, and Real Group Favored Lender
UPDATE: We recently learned in a statement from the Consumer Financial Protection Bureau (CFPB) that the changes are being delayed until October 1, 2015.
The CFPB will be issuing a proposed amendment to delay the effective date of the Know Before You Owe rule until October 1, 2015. We made this decision to correct an administrative error that we just discovered in meeting the requirements under federal law, which would have delayed the effective date of the rule by two weeks. We further believe that the additional time included in the proposed effective date would better accommodate the interests of the many consumers and providers whose families will be busy with the transition to the new school year at that time.
1. It Will Take Longer to Apply For and Close a Home Loan.
The creators of this new policy were definitely thinking in threes. Upon applying for a home loan, homebuyers can expect a Loan Estimate in three days. In order to provide borrowers with ample time to review and discuss adjustments, there will also a be a three-day period following any changes to the loan. Upon receiving the Closing Disclosure, homebuyers will also have three days to read through the documents and ensure that they understand the fine print. There will also be three days for review following any other changes made to the loan, even though lenders will not be allowed to make any changes to the document "unless there is a legitimate reason."
2. The New Loan Disclosure Forms Are Easier to Read.
According to the New York Times, "the new forms use an easy-to-read format to disclose complex terms; in addition to clear entries of principal, interest and closing costs, there is information on prepayment penalties and other complicated loan features.the new forms use an easy-to-read format to disclose complex terms; in addition to clear entries of principal, interest and closing costs, there is information on prepayment penalties and other complicated loan features." The Consumer Financial Protection Bureau issued these forms to restore a power balance between borrowers and lenders. Essentially, these forms will help you "know before you owe." Borrowers need to have a fuller understanding of what they're signing up for, and these forms will support that awareness.
3. You Should Plan Out the Timeline For Your Home Purchase Accordingly.
The glass certainly isn't half-empty for homebuyers! The new forms are easy to read and will help you fully comprehend the financial logistics of what might be the biggest purchase you'll ever make. These changes will hopefully offer some peace of mind as you continue or begin your home search. But, while you are working through this process, do keep in mind that these new Loan Disclosure changes can push back the closing date on your home and affect the day you actually get to move in. Take some time to verse yourself in the language of mortgage lenders and draw up a timeline for yourself with enough time for a few changes to your loan- And, get to know your acronyms!
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