For those who have bought a home before, you know the closing process can be complicated – specifically understanding all the lending forms that detail what you’ll owe for, usually, the next 30 years. Well, a new rule from the Consumer Financial Protection Bureau (CFPB) helps to simplify that.
The TILA-RESPA Intergrated Disclosure (TRID) rule, known as the “Know Before You Owe” mortgage disclosure rule, consolidates four forms into two simpler ones. Homebuyers now will receive a "Loan Estimate" and a "Closing Disclosure" form.
The Loan Estimate Form
This form clearly breaks down the key points of a loan offer from a potential lender, such as loan amount, interest rate, estimated monthly payment and closings costs. The CFPB recommends getting up to three different loan offers to make sure you’re getting the best loan offer.
The CFPB also has a list of questions it suggests asking when you review each of your loan estimate forms so you fully understand the requirements and expectations of each loan.
The Closing Disclosure Form
Similar to the Loan Estimate Form, the Closing Disclosure Form will specify the key points of the loan you’ve selected. It is extremely important that you compare these two forms to make sure nothing has changed between the loan offer you first received and the terms listed on the closing form.
As part of the new rule, lenders are required to send you the Closing Disclosure Form three business days before your closing date to give you enough time to review everything. Purchasing a home is one of the most exciting times in a person’s life, but it’s also a serious financial investment. Use this review period wisely.
Although this new rule should make it significantly easier for the average consumer to understand his or her loan terms, it could potentially slow the home buying process if you aren’t careful, as this USA Today article highlights. For example, any changes to your loan during the three-day waiting period requires a new Closing Disclosure Form, and subsequently, another three-day review period.
This new rule will make things easier in the long run, but also will likely spur a few questions as everyone gets used to the new forms and requirements. Whether you’re a home buyer yourself or are an HR manager helping employees through the relocation process, if we can help answer any questions, give us a call.