We’re just waiting for the Loan Documents!!

I find as a Realtor that the last week before a home closes escrow can be the most stressful. The Seller is anxiously waiting for the   Buyer’s loan documents to get to escrow so they can be signed thus completing the transaction and making the house officially SOLD. The Buyer is on pins and needles for the same reason. This is because the loan documents are the most important documents that a Buyer must sign to purchase a house and have a successful closing. Sometimes getting them can lead to an eleventh hour scramble between the lender, the buyer, (of course the Realtor) and escrow the day before a house closes.

 This will all change as of July 30, 2009 because new Federal Rules protecting home loan applicants are taking affect.  If you are in the process of applying for a loan to buy a primary or secondary home, or considering refinancing a loan, you should be aware of these new federal consumer protection rules which will affect you. They are part of the Mortgage Disclosure Improvement Act and designed to give consumers more disclosure of the cost of a loan and also more time to make a decision. The final rules from the Federal Reserve were modified.

Some of the key changes:

1.  Early Disclosures are required within three business days: The new Federal Reserve regulations require lenders to provide the borrower with initial disclosures of their estimated mortgage costs within 3 days of the original loan application. If you don’t get them on time you can stop the process. A lender cannot charge any up front fees except a reasonable credit check fee. Basically, this now means that a good faith estimate must be given to the borrower before a lender can collect an application or appraisal fee. In the past it was common for a lender to collect these fees upfront before providing an estimate of closing costs.

2. Creditors must wait seven business days to close a loan after early disclosures: This rule prohibits quickie closing on loans by requiring a seven-day waiting period after applicants are handed their early disclosures or if their disclosures are mailed. This period allows a week to think about the transaction and consider if you want to go through with it.

3. Revised disclosures must be provided if a loan interest rate changes: This states that if the final annual percentage rate of the loan changes from the original disclosure by more than 1/8 of a percent, a new disclosure must be provided and the lender has to wait another three days until closing. Once again, the borrower has more time to decide whether to go through with the deal or not.  If there is a financial emergency the borrower can voluntarily close sooner but a lender cannot force the borrower to do so.

 4. Appraisal reports must be delivered to the borrower three days before closing: In the past borrowers had the right to request a copy of the appraisal which many times they never receive.  New rules now require appraisal reports be delivered to the borrower prior to closing. The borrower has the option to waive the three day waiting period if they decide not to receive the appraisal.

 So for a Buyer it is imperative that they start their loan process as soon as a home is under contract. The eleventh hour craziness that can happen before a loan is funded will cease to exist after July 30. Both Seller and Buyer will sleep better knowing that the loan documents will arrive to escrow on time. As a Realtor I will be more confident that the loan documents will be delivered in a timely fashion, while the lender must be on top of the transaction at all times to ensure a successful closing.

 If you have any questions with these new regulations or need any information about buying or selling a home give me a call 619-980-2738 or visit my website.