If you are looking for a house now, it’s likely going to take a little longer to get a mortgage to buy it.
The expected delay is due to a new federal rule that’s supposed to give consumers more protection when they are making one of their biggest financial decisions.
Last week, the “know before you owe” requirements went into effect. The biggest change for borrowers will be the three days they get to review all the final costs of their home loan before they sign.
In the past, many borrowers saw a final tally of their mortgage costs on the day they signed.
“Even if you have bought and sold many homes in the past, if you applied for a loan today you would be surprised at the number of changes due to the new rule,” mortgage lender and expert Amy Swaney of Scottsdale’s Citywide Home Loans told me.
Swaney, who was recently named one of Housing Wire’s Real Estate Finance’s Women of Influence for 2015, said there are new forms for mortgages that must be given to borrowers in “mandatory time frames” and that have required “cooling off” periods attached to them.
Here’s what homebuyers taking out a mortgage can now expect:
- A loan estimate form three days after they apply for a mortgage that they must agree to before an appraisal is started.
- A full-disclosure of their exact loan costs three days before they close.
- A three-day delay on their closing, if they don’t receive their mortgage-cost disclosure form in time.
Dean Wegner of Academy Mortgage has become an expert on these federal requirements that are officially known as TRID , or the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) Integrated Disclosure Rule.
The new mortgage rule, created by the Consumer Financial Protection Bureau, was supposed to go into affect earlier this year but was delayed so more lenders and title agencies could get ready for it. Now, lobbyists from the real estate and lending industries are asking Washington lawmakers to move implementation of the rule to early 2016. But the White House has said it will veto any legislation that delays implementation because the rules are intended to inform and protect consumers in the mortgage process.
Subprime mortgages with high interest rates and hidden costs were pushed by some big lenders during the boom because of the bigger fees they generated. Many borrowers, who took out the loans, didn’t understand them and couldn’t afford the payments. Many of those bad loans led to foreclosures and the real estate market crash in 2008.
“I think it is a good thing that the borrower will have time to think about any unexpected changes to his or her loan terms,” said housing expert Mike Orr with the W.P. Carey School of Business at Arizona State University.
After all, what’s a three-day delay on on a mortgage that you could be making payments on for 30 years.