New home loan rules: What it means for you


Buying or selling a home can be very exciting. It can also be pretty intimidating.

Starting Oct. 3, new federal rules go into effect that are designed to make the process a little easier. As with any new change, there will be ripple effects and those changes will impact how quickly you are able to buy and sell a home.

"This is a really, really big change," said Holden Lewis, a mortgage analyst at BankRate.com.

The official name for this change is a mouthful. The new federally-required disclosures are known as the TILA-RESPA Integrated Disclosures, or TRID.

The rules require two new sets of forms in the mortgage process.

"You'll notice that these new forms have fewer pages. And, they're just simpler to look at, they're easier to understand," said Lewis.

Documents: Before and After

Lenders will have to provide a Loan Estimate within three days of your application. It shows the interest rate, loan-term, line item fees, and the amount of cash needed to close.

"That is designed to make it easier to understand the loan, and it's designed to make it easier to compare one loan offer with another," Lewis said.

Three days before your closing, you must receive the Closing Disclosure form. It looks very similar to the Loan Estimate paperwork, and allows you to see quite clearly if you're getting the loan you were promised. It's the three day requirement that will slow down the process the home-buying process.

The requirement is designed to give home buyers to digest the information. In the past, you would often get the closing documents as you were doing the final paperwork, forcing you to review the final terms at the last minute. However, that three day requirement is going to make the closing process longer.

Ruth to the Rescue also spoke with Brian Seibert, President of Michigan First Mortgage of Waterford. He says lenders are going to build in an extra 10 days to two weeks to into the closing process in order for all the paperwork to be finalized and into the hands of the borrower three days before the actual closing.

Also, if there are any last-minute glitches in the sale there will be another delay. "If there's a change in the last day or two that means you can't close on time. You have to get a new closing disclosure and then move that closing back another three days," said Holden Lewis, a mortgage analyst at BankRate.com.

As a result, Lewis is telling buyers to ask for a longer lock on your interest rate just in case your closing runs into a snag. And, during the transition, be prepared for bugs that might pop up.

"Lenders and title companies have had to rewrite software from the ground up, said Lewis.

Finally, if you're in the middle of the home-buying process, already have a loan, and will close after Oct. 3, you will still use the old documents to complete the transaction. The new rules and documents only apply to loan application filed on or after Oct. 3.

If you're about to buy or sell a home, talk about these changes with your realtor and lender to make sure everyone is on the same page, and you understand all the implications.