To help homebuyers through the closing process, the Consumer Financial Protection Bureau has made changes to simplify the paperwork load. The “Know Before You Owe” rules make it easier for consumers to understand their mortgage terms and make comparisons. They boil down the previous four forms into two: the Loan Estimate (replaces the Good Faith Estimate and initial Truth-in-Lending disclosure) and the Closing Disclosure (replaces the HUD-1 Settlement Statement and the final Truth-in-Lending statement).
“These new rules are intended to simplify the disclosure and loan-closing process for consumers and better prepare buyers for their mortgage transactions,” said Chris Polychron, president of the National Association of REALTORS® (NAR).
Instead of bundling all the costs together, the new forms show exactly how much buyers will be paying for each service separately, allowing them to more easily compare costs of different lenders. The new rules also give borrowers more time to review their closing documents, providing them three days instead of one before they must accept the terms and sign the papers.
The increased waiting periods can cause delays, so borrowers should build in a cushion of time if they want to lock-in their interest rates. NAR recommends that its brokers and agents add two weeks to a normal closing date.