Slower Closing Procedures Soon in Effect in Snohomish County and across the country. This year, the Consumer Financial Protection Bureau (CFPB) begins requiring banks to provide consumers with a longer window in which to review loan documentation. The new rule, potentially in effect October 3, 2015, can push closing by as many as six days—to more than a week—longer than usual. Buyers needing to close quickly may need to begin negotiations sooner in order to meet a move-in deadline.
Conversely, the changes could give an advantage to all-cash buyers over those needing conventional financing, since sellers looking to close quickly may choose a faster close over a higher take. In a hot seller's market, cash may be king for the buyer.
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Slower Closing Procedures - Here's a breakdown of the new ruling:
Originally slated to roll out August 1, in October, the federal government will require that loan disclosure documents contain a combination of both the Real Estate Settlement Procedures Act (RESPA) and the Federal Truth in Lending Act (TILA) in a document known as the TILA-RESPA Integrated Disclosure (TRID). The ruling, known as "Know Before You Owe" must accompany the Loan Estimate and include all charges, fees and line items at least three (business) days before closing. In the past, this information was given to consumers on the day of closing on the HUD-1 form. With these changes, the HUD-1 form will no longer be necessary.
The purpose of the changes is to mitigate the potential for surprises at the closing table and offers an advantage to buyers since any increase of more than one-eighth of a percent during the three-day window—or other changes such as pre-payment penalties, additional fees or other items that increase the consumer's financial responsibility—requires entirely new documentation and another three-day window. Note that a decrease in interest or fees will not cause such a delay.
According to the CFPB the new forms are easier to understand and use. During testing, participants returned more correct answers about their sample mortgage using the new forms as compared to the traditional forms. The new form lists the total loan amount, interest rate, monthly principal and interest and projected payments on the first page of the form. Closing costs and cash required to close appear at the bottom of the easy to read page.
Specifically, the first section on the face of the document clearly indicates if the amount of the loan, interest rate and monthly principal and interest can increase after the closing, and prepayment penalties and balloon payments are plainly indicated.
In the second section, projected payments for the life of the loan, including the years in which increases may occur, gives the buyer the needed information to plan for the future.
The primary advantage for home-buyers is that the three-day window allows them to walk away from a deal without penalty in certain circumstances and allows them to more quickly understand the terms of their mortgage.
A disadvantage for those needing to close quickly is that bankers, mortgage lenders, escrow officers and other real estate professionals will need to learn the new documentation and set up computer software and other systems to prepare it.
Slower Closing Procedures Soon in Effect in Snohomish County
What does this mean to you when you are purchasing a home or selling a house in Snohomish County or Skagit County? We have become accustomed to a 30 day close with traditional financing. The changes can push this out to 45 days or more. The lenders now need to prepare the additional forms and provide them to the borrower. Depending on how quickly the lender can prepare these documents, the closing can take 6 days or more than it does today.
If you need to purchase a home or sell your house by a specific date, you will need to make a decision sooner and get the process started so that you can meet your deadline.
If you have questions about the new forms and how to understand them, contact Kerryann Pray at 425-359-0181 for advice and information. When buying a home with a mortgage in Snohomish County this fall, be certain to calculate additional time in closing to accommodate the new ruling. Slower Closing Procedures Soon in Effect in Snohomish County, Skagit County, Island County, and all across the country.
Keller Williams NWRE LLC
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