Big Changes Coming to the Mortgage Closing Process
If you are closing on a home on or after August 1, 2015, you should be aware that big changes are coming to the closing documentation that so many people have become accustomed to. Replacing the old Good Faith Estimate (GFE) and Truth In Lending (TIL) disclosures that mortgage applicants receive at the beginning of the process will be a new form, the "Loan Estimate." Similarly, the HUD-1 Settlement Statement that has long been a staple at closings is also disappearing. In its place we will have the "Closing Disclosure."
This is the good part of the changes coming on August 1st. The GFE and TIL have been notoriously difficult for consumers to interpret. The HUD-1 has also required some explanation due to the amount of detail it tries to relay in a somewhat convoluted manner. The Loan Estimate and Closing Disclosure remedy that. They are similar -- and thus much easier to compare -- but more user-friendly. Borrowers can expect to see numbers laid out in bold, and questions like, "Can my interest rate adjust?" written out and answered with a simple Yes/No, further detail provided as needed.
What will aggravate unaware homebuyers is not the new forms, but the new timelines for when the closing documents must be distributed to the borrowers. Specifically, three days prior to closing. In theory, this is a good thing, as it gives buyers time to review the documents prior to the closing table. However, in this environment of sellers eager to close and documentation guidelines as tight as ever, lenders' and attorneys' offices aren't always able to get those documents out so quickly, resulting in potential delays in getting to the closing table.
How can you avoid these problems? Quite simply by being very proactive with your document submission during the mortgage process. Even once a loan is clear-to-close, there are still steps that need to be taken by the lender's closing department and the attorney's office to verify the numbers and draw up the forms, both of which take time. Make sure you get the documents required by your lender to your loan officer as quickly as possible when you apply for a loan to prevent any last-minute delays! The 3-day waiting period will be federally mandated and therefore, unless they build in a way to waive it, will be unavoidable.
Guest blogger Austin Reed is no stranger to the South End as both his home and office are located in the neighborhood. With over 40 years of combined mortgage experience, he and his team specialize in everything from first time homebuyers to the experienced homeowner looking at high-end condos or moving out to the suburbs surrounding Boston. Feel free to stop in and say hello at the Tremont Street office, or if you see Austin around the South End at one of the many restaurants he frequents after work.