What new mortgage rules mean for first-time homebuyers

Clearly breaking out these figures should make it easier to compare loans from different lenders (yes, you should shop around) to find the best rate and terms. But the process just got a little simpler.

Introduced Saturday by the federal Consumer Financial Protection Bureau, the “Know Before You Owe” mortgage-disclosure rule replaces four disclosure forms with two new ones – the Loan Estimate and the Closing Disclosure.

“Forcing your bank to disclose the comparable mortgage lending terms of its competitors may improve information symmetry for the consumer”, Gillen said.

The second document provided is called the Closing Disclosure. The letter also notes that the mortgage industry has dedicated substantial resources to understand the requirements, adapt systems, and train affected personnel, and additional technical and other questions are likely to be identified once the new forms are used in practice after the effective date.

Consumers are expected to benefit from the rule changes because any change in the loan estimate that’s more than one-eighth of a percent (12.5 basis points) in the three-day period for a fixed-rate loan or a quarter of a percent (25 basis points) for a variable rate loan – or any additional fees, such as a prepayment penalty – requires an entirely new disclosure period.

With the new regulations, lenders are required to give buyers a loan estimate within three days of the buyer’s application.

“There will be buyers and sellers that will be shocked they can’t make an adjustment to their contract three days before their settlement”, said Bob Davis, executive vice president at American Bankers Association.

“That means that as these new rules take effect, the hard work to deliver timely and efficient closings continues; extra time for closings and open lines of communication will be critical”.

“The fact that more of the typical transaction is being done on the computer may ease the transition”, said Val Nunnenkamp, an agent with Berkshire Hathaway Home Services Fox & Roach Realtors in Marlton.

“As long as the estimates are accurate – and don’t change – things will be fine, Scarpello said”.

The new rules aim to prevent this kind of confusion with the hope of making the lending process easier and more convenient both fir the lender and the buyer.