for a new home now? Or planning to go house hunting this
spring? You’ll want to pay attention to some new
mortgage disclosures that rolled onto the scene
beginning in October.
goal is to protect consumers from taking on too big of a
mortgage, rushing into a loan before they understand the
real cost or signing documents without realizing they’re
agreeing to some cumbersome conditions.
designed to bring the prospective homebuyer into a
better position to understand the whole
transaction," said Andy Slettebak, director of
lending for the nonprofit NeighborWorks America.
Ratcliffe, assistant director of the Office for
Financial Education at the Consumer Financial Protection
Bureau, said the new disclosures are an improvement
compared with previous disclosures. They were created to
be easier to read and give consumers more information up
front about the homebuying process. Three key features,
she said, are:
A lender now must provide you a loan estimate form
within three days of receiving your application.
three-page loan estimate discloses the estimated costs
of taxes and insurance, and how the interest rate and
payments may change in the future. You could spot
potential risks associated with the loan, such as if
this particular product possibly includes a penalty for
paying the loan off early. Or maybe there’s a balloon
payment — a larger than usual one-time payment at the
end of the loan.
key bit of detail: This form allows you to better
compare loans by seeing how quickly you’d reduce the
loan principal in five years. You’d see the total
mortgage-related costs over five years.
some shopping for mortgages and a home before obtaining
a loan estimate.
you receive this new document, you need to provide the
lender with your name, your income, your Social Security
number, the property address, an estimated value of the
property and the desired mortgage.
Consumers must receive their closing documents at least
three days before closing so they have a real chance to
review the paperwork.
where some extra consumer protection could shake up the
process a bit. The new three-day window gives you a
chance to compare your final terms to what you received
earlier in that loan estimate. You’d receive a
five-page closing disclosure.
know exactly what cash you need to bring to the closing
table. You’d also want to check such things as your
interest rate, loan amount and monthly payment. You can
see what you’d be charged for a late payment
Robinson, a spokesman for the nonprofit NeighborWorks
America, said some consumers had complained during the
foreclosure crisis that the closing documents that were
brought to the table were different from what was
presented earlier. Now, consumers would have more time
to review the terms and get more information if they
process, though, is new and only went into place Oct. 3.
So some lenders have expressed concern that the timing
for providing the closing disclosures might create an
inconvenience for some consumers who are particularly
eager to close on their mortgage. Issues might arise,
for example, if a last-minute change were to trigger the
need for a new disclosure and yet another three-day wait
closings could take longer while title companies gain
more experience, according to Bankrate.com. So borrowers
could want a longer rate lock of 45 days or 60 days,
instead of a 30-day lock, given some uncertainties.
Lyon, executive vice president of operations for Quicken
Loans, said the way he’s reading the regulations a
customer would need to acknowledge that he or she
received the disclosure documents electronically in
order to close more promptly. If not, that closing could
string out to 7 business days because of the way the
rules are written.
CFPB’s compliance guide notes that if the disclosure
is provided in person it is considered received on the
day it’s presented. If it is mailed or delivered
electronically, though, the consumer is considered to
have received the closing disclosure three business days
after it is delivered or placed in the mail. And then,
the consumer has three days to review after that,
stringing out the process.
97 percent of Quicken’s clients receive closing
documents electronically via the company’s
MyQuickenLoans website, where the customer can instantly
acknowledge the disclosure. If the consumer confirms
receipt of documents received electronically, the
creditor can consider it received on that date. And the
closing could take place more quickly.
said there could be a learning curve when it comes to
think it’s going to be a little bit of a bumpy ride up
front," Lyon said.
Consumers can do more research online before shopping
for a house or mortgage.
online suite of tools at the CFPB site enables consumers
to explore interest rate options in an area.
CFPB site has an "explore interest rates"
feature that offers data from lenders and is updated
each day. Consumers can scroll down a tool bar to select
their state, enter in an estimate of the price of the
house, and other information.
consumers view the homebuying process, perhaps not
surprisingly, as a complicated transaction, according to
research by NeighborWorks America.
more information earlier in the game can be helpful.
"Home Loan Toolkit" is available too. You’d
get a toolkit when you apply for a mortgage to buy a
home or a consumer could download the tool kit at
tip: If your credit is below 700, you will likely pay
more for your mortgage. But if you work on improving
your credit and wait to buy a home, you will likely save
money. Some people who improve their credit can save $50
or $100 a month on a typical payment, according to the
"Your Home Loan Toolkit."