Who has purchased a home in the last 10 years or refinanced their mortgage only to receive a pile of paperwork that needed to be signed but made little to no sense to those of us signing it? Well that is hopefully being changed with the new disclosure regulations that went into effect August 1, 2015. Now that the new rules have gone into effect, buyers and those that are refinancing will see two new documents: the Loan Estimate and the Closing Disclosure documents.
Replacing the Good Faith Estimate and the early Truth-In-Lending statement (let’s be honest…that one never made any sense!) is the Loan Estimate Form This form summarizes the terms of a mortgage and estimates any and all loan fees and closing costs. The new form combines the original Good Faith Estimate with the early Truth-in-Lending statement into one shorter and hopefully easier to decipher document.
Replacing the final Truth-in-Lending statement and the HUD-1 settlement is the Closing Disclosure Form. This form provides a detailed account of the entire real estate transaction, including loan terms, fees and closing costs. The new document combines the Truth-in-Lending statement and the HUD-1 Settlement statement into a form that is shorter and more user-friendly. It’s easier for consumers to read and for them to truly understand where all of those closing costs are going!
“Fifteen years ago lenders and title companies weren’t held to their estimates of what a loan would cost, so occasionally you would hear horror stories of borrowers forced to pay an extra $5,000 at the closing table,” says Mark Dietz, senior vice president and area sales manager for EagleBank in Potomac. “Earlier revisions to transaction documents made it clear which fees could change and which ones couldn’t. These new revisions are taking clarity one step further, which is a good step to make consumers feel more confident that they understand their loan terms.”1
The experts that have worked diligently to create the updated forms say that the new documents are designed to make it easier for consumers to compare loan options as well as to understand and become aware if something changed between the time of loan application and settlement. I am all for an easier way of comparing loan terms between different lenders! It will let the borrowers/buyers make an educated decision about which program works best for their financial situation.
If you buying a home, be sure that your lender provides you with all of the documentation that you need to make the process a seamless one. Don’t be afraid to ask questions and be sure to understand what these forms are telling you. Review the documents with your Realtor to ensure that the fees are the norm and that there isn’t anything that you should be concerned about. Your friends at Thomas D. Brown Real Estate can help you find a lender, a closing attorney and review the updated documents with you.