Closing on your new home is an exciting time — but it also can be an overwhelming process. Home buyers are usually required to sign a seemingly endless pile of documents, most of which are written in terminology that can be difficult to understand.Fortunately, the process is about to get easier.
Under new rules required by the Consumer Financial Protection Bureau, four closing documents will be merged into two new documents: the Loan Estimate and the Closing Disclosure form. The design of the forms and their terminology will be more consumer-friendly to help home owners better understand this complex process.
The existing Good Faith Estimate and Truth in Lending disclosures will be eliminated and combined into a single Loan Estimate form. The Loan Estimate must be delivered to the buyer no later than three business days after receiving the application.
In addition, the final Truth in Lending Disclosure and HUD-1 Settlement Statement are being replaced by the Closing Disclosure form. This form must be provided to the consumer a full three days prior to the closing, and if there are changes during that 72-hour period, the closing could be delayed.
This is a big change from the current process that allows the HUD-1 Settlement Statement to be presented to the buyer as late as the day of closing and allows changes to be made to the statement during the loan closing. This extra time will allow consumers to review the final terms of the loan and ask any questions before closing day.
These new rules are intended to streamline the loan application process and make it easier for consumers to understand their loans. On one page consumers will clearly see the most relevant details: the interest rate of the mortgage loan, the amount of the monthly payments and a listing of all the closing costs. This also will help consumers more easily compare mortgage loan options from different lenders.
For consumers applying for adjustable rate mortgages, the documents will explain how their interest rate and future monthly payments could change based on certain factors.
Learn more about the new home closing rules at www.consumerfinance.gov/knowbeforeyouowe.
Find out more about the home closing process by contacting by visiting nahb.org/forconsumers.