The mortgage industry got a major shakeup recently with the sweeping changes made towards the mortgage application process, dramatically reducing the amount of paperwork and simplifying the legal and financial terms, so buyers have a better understanding of what they are signing. Here are a few of the important items to be aware of with the new mortgage documents.
Previously, there were four different forms involved in a mortgage application: the Good Faith Estimate, the Truth-in-Lending Act statement, the HUD-1 settlement, and the TILA statement, the latter two received during the closing stage. These four documents have now been reduced to just two: the Loan Estimate given to a buyer within three days of a home loan application and the Closing Disclosure sent to a buyer three days before closing.
With the Loan Estimate, it is now significantly easier to evaluate and compare loan offers from different lenders, clearly stating the differences in interest rates, whether they are fixed or adjustable, how much you’ll be paying every month and other important details. The Loan Estimate also states the approximate amount of money you’ll need to pay for the closing fees and become a new homeowner.
As for the Closing Disclosure, it will list three important items related to closing costs: the costs that will remain fixed, those that can increase by up to ten percent, and the ones that can increase by any amount.