New regulations go into effect on Saturday, October 3rd, providing new loan disclosure forms that areÂ designed to help you better understand the terms of your home mortgage before you close on your new home. That means if you applied for a loan on or after that date, you will receive the easier-to-understand forms.
What You Need to Know About theÂ New Closing Disclosures
To summarize, these new rules combine mortgage loan disclosuresÂ from both the Truth-In-Lending Act (which informs consumers about loanÂ terms) and the Real Estate Settlement Procedures Act (which deals with closings) into one simplified set of disclosure formsÂ for home buyersÂ who are gettingÂ a mortgage.
The official title to these regulationsÂ is a mouthfulÂ â€” Truth-In-Lending Act / Real Estate Settlement Procedures Act Integrated DisclosureÂ Ruleâ€” so the regulations areÂ just referred to as TRID. (The enforcement agency, the Consumer Financial Protection Bureau, also calls it â€œKnow Before You Owe.â€)
â€œKnow Before You Oweâ€Â is designed to help borrowers clearly understand the costs and terms of their home mortgages.Â Here are the changes that you can expect from these new regulations, from the number of forms youâ€™ll need to fill out to the timeÂ requirements that can alterÂ your closing date.
Youâ€™ll Have Two Forms Instead of Four
If youâ€™re getting a mortgage, youâ€™ll receive two forms under â€œKnow Before You Owe.â€ The first, a loan estimate, based on your financial information. Youâ€™ll receive the loan estimate 3 business days after applying for yourÂ mortgage. The second, a closing disclosure, which outlines all of the costs you will need to pay. Youâ€™ll receive that form 3 business days before closing.
These two new forms are more user-friendly, and are replacing four separate forms that home buyers received before â€” two Truth-In-Lending statements, theÂ loan estimate, and aÂ list of itemized fees.
With these new regulations, you will have time to review the terms of your mortgage well before closing, so you can understand exactly what fees there will be. You can read the Consumer Financial Protection Bureauâ€™s full guide to the loan estimate and closing disclosure forms here.
There is a 3-Day Review Period Before Closing
Under the new â€œKnow Before You Oweâ€ rules, mortgage lenders must sendÂ you easier-to-understand informationÂ about your loan â€” the Closing Disclosure formÂ â€” 3 business days before closing on your home, giving you time to review the terms of your mortgage.
However, some changes to the mortgage termsÂ â€” like changes to your interest rateÂ or the loan product itselfÂ â€” will meanÂ that you will need anotherÂ 3-business-day review period, possibly delaying your closing date.Â If you would like an overview of the details, the CFPBÂ highlights the instances where the 3-day review period would be affected.
We Can Answer Your Questions AboutÂ â€œKnow Before You Oweâ€
If you are buying a home and have questions about these new regulations, and what it might mean for closing on your home in the future, contact our real estate expertsÂ today and we will be happy to answer your questions in detail.