New Home Loan rules Require Earlier Loan Cost Disclosure and Longer Closing Wait Times

As you mull buying a home, you're probably focused on coming up with the down payment and figuring how to finance the remaining house price. But thousands of dollars in other costs come into play, too, such as bank closing costs, title charges, and home inspection fees.

More Truth In Lending

Now, thanks to new federal consumer protection rules that went into effect in July, lenders must disclose earlier in the mortgage application process how much the loan will actually cost and give you more time to think it over. The new rules are part of the Mortgage Disclosure Improvement Act of 2008, an amendment to the Truth in Lending Act. Here's how they affect you:

Earlier Mortgage Cost Disclosure

Within three business days of receiving your mortgage application, lenders must give you a good-faith estimate of how much the loan will cost, and they can't charge any fees before then other than a reasonable credit check fee. That gives you a chance to review loan costs before proceeding further and paying appraisal charges or other fees.

Appraisal Report a Must for Mortgage

Lenders must provide an appraisal report at least three business days before closing. Before, when consumers neglected to ask for appraisal reports, lenders sometimes failed to provide them. Now you'll get a report, regardless of whether you ask.

Longer Home Loan Decision Time

After you get the initial loan estimate, you'll have seven business days to choose whether to close. And if the most recently-disclosed annual percentage rate for the loan changes from the disclosure by more than one-eighth of a percent, the lender must provide a new disclosure and wait another three days before closing. You can waive the waiting period in a financial emergency, but otherwise it's there to protect you.

Longer Waits for Mortgage Closing

The new rules give you more time to decide whether the loan is right for you, which is a good thing. But they also mean longer waits for closing--a downside if you're eager to take advantage of the $8,000 federal tax credit. Bank compliance officers are scrambling to keep up with all the new regulations that have come down the pike in the last 18 months, and they acknowledge it's taking longer to close deals.

Help from Mortgage Calculators

Get a jump on the process now. Learn how lenders see you with the prequalification calculator, and plug in loan amount and interest to see how much your payments will be with the monthly mortgage payment calculator.


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