Unbeknownst to many consumers and potential homebuyers, the mortgage industry has recently implemented brand-new processes and structure, thanks to recent rulemaking by the Consumer Financial Protection Bureau (CFPB). The new "Know Before You Owe" rule has been in place since October 3, and it is designed to help borrowers better understand the complicated 21st-century mortgage. he new forms should help eliminate overlapping disclosures, industry jargon, and make it easier for the borrower to compare fees and rates between the Good Faith Estimate (what you get at the beginning of the process) and the HUD-1 Settlement Statement (what you would receive at closing).
However, borrowers should be aware that the new forms come with a new process, one that is likely to be slower and more deliberate. Not only are lenders and real estate agents still adapting to the "Know Before You Owe" forms, but a much more rigid timeline and procedural hurdles that can grind the process to a crawl. For instance, borrowers will now receive their Closing Disclosure (outlining the final costs) at least three days prior (instead of one) to the closing date. If lenders miss that deadline, there is no wiggle room, and the process will snag. Additionally, the new rules to make it hard to make corrections or changes to completed documents, meaning a change in the interest rate (of 0.125% on a fixed-rate mortgage or 0.25% on an adjustable-rate loan) will likely delay your closing. rulesThe Closing Disclosure will have to be resubmitted, along with the three-day waiting period.
Aside from being patient, what can homebuyers do to help keep the process on track? According to experts, one way to avoid a delay in closing is to monitor your credit closely and make sure you don't make any large purchases or do anything that could change your credit score. That would likely change your interest rate and trigger a new Closing Disclosure. Another good tip is to plan ahead by locking the rate for more than the usual 30 days, giving yourself some protection if your closing is delayed for a day or two.
The good news is that industry professionals have known about the rule for many months and gearing up for "Know Before You Owe" has been a focus of mortgage and real estate companies throughout 2015. Every company has (or should have!) undergone extensive training and preparation to minimize delays and provide consumers with an easy transition. If you get confused, don't worry! The CFPB has a helpful explanation of the new rules, and your mortgage professional should be able to fully explain the new regulations. Happy house hunting!