New mortgage forms: Steps to help stay on track for closing
Homebuyers will receive two new disclosure forms starting in October that will make it much easier to understand all the costs of a home loan.
This is an exciting and important change because these new forms — a Loan Estimate (LE) at the start of the loan application process and the Closing Disclosure (CD) at the end of the process — are a big step forward to help homebuyers see all their borrowing costs: the monthly payment, the long-term borrowing costs, the detailed costs for a particular mortgage, and the total cash needed when signing for a mortgage.
Because these forms are new for borrowers, real estate agents, and lenders, I suspect there will be hiccups this fall as we all get used to the changes. My overarching suggestion is stay on your toes and move quickly. That means provide information, review documents, ask questions, and make any changes sooner rather than later.
Here are seven steps for borrowers to consider for helping keep a mortgage application on track for an on-time closing:
1) Give your lender any documents necessary to complete the loan as soon as possible.
2) Read the Loan Estimate (LE) that you will receive when you apply for a mortgage and ask questions about anything you don’t understand. If there are revisions to the LE, look carefully at those changes and ask questions to resolve any issues as early as possible in the process.
3) If you need to make changes to your loan, make them sooner rather than later to avoid delaying the closing. Changes to your loan now trigger a mandatory 3-day waiting period to help ensure borrowers have ample opportunity to review and ask questions about changes.
4) Work with your real estate agent to conduct home inspections, order reports, such as pest inspections, and clear any contingencies as early in the process as possible.
5) Schedule your final walk-through well before the Closing Disclosure is issued, if possible.
6) Let your lender know as soon as possible about any changes or potential changes to the transaction that might affect the loan or the timing of closing.
7) Be prepared for the changes that are coming with these new disclosure forms. The new disclosures and the new processes that the federal government is requiring of lenders may add time to the loan and closing process, particularly in October and November as we all adapt to the new forms.
The mortgage industry’s average time to close a loan is currently around 48 days, according to this EllieMae report from July. suspect that average will climb a bit; and fast closings, of say 30 days, will be more difficult in coming months as borrowers, real estate agents, and lenders get used to the new forms. So in the near term my recommendation is do your part to help keep your loan moving forward but also expect a slower loan process — be prompt and be patient.