Starting October 3rd, home buyers who wish to apply for a mortgage will receive a new rate and fee quote forms from their respective lenders. Lenders are required to deliver it to buyers twice, which are bound to be implemented at the beginning and the end of the loan process.
This part of the federal mandate goes by the name TILA-RESPA Integrated Disclosures or TRID. As these changes to the home-buying process are set to take effect next month, it puts those in the mortgage industry wary of its inefficiency and those in search for their dream home slowed down in the buying stage.
However, these rules are actually set in place to make it easier for buyers to understand the entire process, while safeguarding them from surprises brought about by unexpected costs. It also aids in giving financial security to the economy and a smooth-running profession for agents, lenders and title professionals alike.
This extra time indeed defines the thin line between a seller accepting or rejecting an offer, hence it is essential to know ways on how to optimize your timing to be able to write offers that have an edge in closing faster than competing buyers.
Timing Rules for the Loan Estimate Disclosure
The initial disclosure is the Loan Estimate document, showing the rate quote, line-item fees, the term of the loan and cash required to close.
Before the lender can collect fees for the next critical steps of the home loan process such as ordering an appraisal, your intent to proceed based on the loan estimate must be obtained.
The Loan Estimate is given three days upon applying for a mortgage, either through mail or electronic delivery as governed by the Consumer Financial Protection Bureau or CFPB, which is the federal agency who enforces the TRID rules.
For instance, if you applied with a lender that utilizes mail delivery on late Wednesday, your Loan Estimate and intent-to-proceed disclosures are typically mailed out on Thursday and you most likely getting it on Saturday. They are prohibited from collecting fees and ordering your appraisal until the time they receive your consent. This day would already be Monday, which would count six days further into the process.
On the other hand, given a similar scenario of applying late on a Wednesday, a lender who utilizes electronic delivery could deliver your Loan Estimate and intent-to-proceed disclosures online on that evening. With your consent immediately on hand, collecting fees and ordering the appraisal is done right on the same evening, or on the very first day of the home loan process.
Timing Rules for the Closing Disclosure
The second document is the Closing Disclosure, which appears almost exactly the same as the initial Loan Estimate disclosure. This renders familiarity and allows buyers to easily review closing terms while comparing to the original quotes. Further clarity is also provided for in aspects of closing costs by outlining which line items are shouldered by the buyer, seller, or those paid by third parties.
This document is to be presented at least 3 days prior to signing documents at closing, following the new CFPB disclosure rules where Sundays and holidays are not included in the three-day waiting period. Also, day one pertains to the day after you receive the Closing Disclosure.
For instance, a lender sent it to you on a Wednesday, the three-day waiting period would basically be Thursday, Friday, and Saturday. Your loan will be funded and your home purchase closed on Monday, six days from the point you received the closing disclosure.
Fastest Timing for the New Disclosure Processes
Prior to October 3, 2015, funding can be performed the same day you get your final disclosures. Based on this timing, real estate agents are accustomed to writing purchase contracts accordingly.
Beginning October 3, 2015, agent and lender will closely coordinate when writing purchase contracts to ensure the new TRID timelines are followed through and write the contract in the soonest possible time.
The fastest timeline for post-application:
For a detailed loan estimate form mailed by a lender after application, the new TRID rules add six days from the beginning of the home loan process to getting an appraisal order.
For a detailed loan estimate form sent electronically by a lender, application to appraisal order is completed in a single day.
The fastest for pre-closing:
All closure disclosure documents sent by lenders must comply with the three-day waiting period once the Closing Disclosure is ready, where funding itself and closing can take more than 3 days as shown in the previous example.
The key to a smooth mortgage process with the shortest timings is by directly asking your lender about their streamlined process for CFPB’s new TRID rules. It is best to have them clarify their ideal closing timelines with your real estate agent before ultimately writing any offer.