New rules from the federal Consumer Financial Protection Bureau (CFPB) have shaken up the home-buying and closing experience.
Called the ‘Know Before You Owe’ mortgage initiative, the rules aim to simplify loan disclosures and change the timing of some elements in the mortgage process.
The bureau launched the initiative at the direction of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). Dodd-Frank wanted to integrate mortgage loan disclosure forms and processes regulated by two federal statutes.
The forms’ overlapping and inconsistent language often confused homebuyers. Lenders and settlement agents found the forms burdensome to provide and explain.
Newly designed forms using surprisingly clear language for government documents changed all that. The ‘Know…’ initiative simplifies loan documentation and generally requires more time between steps in the loan process.
The downside is that the extra time stretches out the overall loan process, which can be frustrating for buyers wanting to move into their dream home ASAP.
The CFPB, however, says this extra time gives homebuyers, like you, ample opportunity to make informed decisions and further protects them. That’s a good thing.
Part of the informed decision making includes five steps buyers can take to ensure a smooth process and on-time closings.
OK, buyers, here’s the scoop.
Pay close attention to credit reports and scores. Believe me, you don’t want any ugly surprises later. You still have time to correct errors and maybe raise your score a couple of points.
2. Apply for loan estimates from more than one bank. You might be surprised at how competitive they are. Did you know that estimates no longer require written documentation? This is one of the areas the new disclosures simplify the process.
3. OK, so now you’ve got a loan estimate. What’s next? Estimates last only 10 days so you’ve got to keep the process moving forward. Be sure the bank knows you want to proceed, otherwise the estimate could expire and you’ll need to start from scratch.
4. Remember Paul Newman in the movie ‘Cool Hand Luke’? After Newman’s character sasses the ‘Captain,’ the Captain glares at him and says, ‘What we’ve got here is failure to communicate.’
When you’re buying a house, avoid ‘failure to communicate’ at all costs.
Don’t be shy.
Property taxes, homeowner’s association fees if any, significant problems identified in the homeowner’s disclosure statement, seller’s real estate broker information and other information should all be shared with the bank.
Your mantra ought to be, ‘In the spirit of no surprises.’
Follow these five steps to make sure your closing is smooth and on time. Look to your real estate agent and broker to help you through the process. They’re experts at this and will make life a lot easier for you.
It’ll be rewarding when you cross the threshold of your dream home.
Questions? Email me: jim@FirstTeamRealtyExchange.com