Beginning Oct. 3, home buyers who want to apply for a mortgage with get new rate and fee quote forms from their lenders. Lenders are required to give it to buyers twice – at the beginning and at the end of the loan process.
This is part of a federal mandate. It is called TILA-RESPA Integrated Disclosures, or TRID. These changes to the home-buying process are set to take effect next month, and it is making the mortgage industry wary of its inefficiency and slowing down those in search of their dream home.
These rules are actually put in place to make it easier for buyers to understand the whole process and to safeguard them from surprises brought about by unexpected costs. These forms also aid in giving financial security to the economy and a smooth-running procession for agents, lenders, and title professionals.
This extra time defines the thin line between a seller accepting or rejecting an offer, so it is important to know how to optimize your timing so you can write offers that have an edge in closing faster than competing buyers.
Timing Rules for the Loan Estimate Disclosure
The initial disclosure is the Loan Estimate document, which shows the rate quote, line-item deed, the term of the loan, and the cash required to close. Before the lender can collect the fees for the next steps of the loan process – like ordering an appraisal – they must get your intent to proceed based on the loan estimate.
The Loan Estimate is given three days after you apply for a mortgage either by mail or by electronic delivers. This is governed by the Consumer Financial Protection Bureau (CFPB), the federal agency that enforces the TRID rules.
For example, if the application was received by your lender late on a Wednesday, your Loan Estimate and intent-to-proceed disclosures are typically mailed out on Thursday so that you likely get it on Saturday. The lender cannot collect fees and order your appraisal until they get your consent. This day would be Monday, which is six days further into the process.
On the other hand, under the same scenario, a lender who uses electronic delivery could deliver your Loan Estimate and intent-to-proceed disclosures online that evening. With your consent on hand immediately, collecting fees and ordering appraisals can be done that evening – the very first day of the home loan process.
Timing Rules for the Closing Disclosure
The second document is the Closing Disclosure, which looks almost exactly like the initial Loan Estimate Disclosure. This will be familiar and lets buyers easily review closing terms while comparing them with the original quotes. More clarity is given by outlining which closing costs are paid by the seller, buyer, or third parties.
This document must be presented at least three days before closing, following the new CFPB disclosure rules (Sundays and holidays are not included in the three-day waiting period). Day one is the day after you get the Closing Disclosure.
For example, if a lender sent it to you on a Wednesday, the three-day waiting period would be Thursday, Friday, and Saturday. Your loan will be funded and your home purchased closed on Monday, six days from the time you got the Closing Disclosure.
Fastest Timing for the New Disclosure Processes
Before Oct. 3, 2015, funding could be performed the same day you got your final disclosures. Real estate agents are used to writing purchase contracts based on this timing.
Beginning Oct. 3, 2015, the agent and lender will closely coordinate when writing the purchase contracts to make sure the new TRID guidelines are followed and to write the contract in the shortest possible time.
The fastest timeline for post-application: For a detailed loan estimate form mailed by the lender, the new TRID rules add six days from the beginning of the home loan process to getting an appraisal order. For a detailed loan estimate sent electronically, application to appraisal order can be completed in a single day.
The fastest for pre-closing: All Closing Disclosure documents sent by lenders must comply with the three-day waiting period once the disclosure is ready, where funding and closing can take more than three days as shown in the example above.
The key to a smooth process with the shortest time is to ask your lender about their streamlined process for CFPB’s new TRID rules. Have them clarify their ideal closing timelines with your real estate agent before writing any offer.
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