In an effort to curb the “questionable” lending practices that many blame for our foreclosure “crisis”….the laws pertaining to mortgages when purchasing a home have changed dramatically! The intent is to protect you…the borrower….but only time will tell if it entirely hit its mark.
Here are key highlights of the changes:
Lenders must give good faith estimates of mortgage loan costs within 3 business days after the consumer applies for a loan (early disclosure). The lender may not collect any fees before the disclosure is provided, except for a reasonable fee for obtaining a credit report.
GOOD- Estimated closing cost will be more accurate
BAD – Many closing fees are simply not known when you get your initial Good Faith. For example, the lender doesn’t know what home you will buy so how can he/she know what taxes will be or HOA fees? The lender also doesn’t know who the title company will be so how can they know what title fees will be etc…..in every closing the figures vary from the initial GFE but now if they change….your closing can be delayed…..but they inevitably WILL change…..so I don’t really see the logic behind this.
The closing may not take place until expiration of a 7 day waiting period after the consumer receives the early disclosure.
If the annual percentage rate (APR) changes by more than 0.125 percent, the lender must provide a corrected disclosure to the borrower and wait an additional 3 business days before closing the loan. The APR includes not only the interest rate on the loan but certain other costs related to settlement, so it will be important for any fees that affect the APR to be as accurate as possible, as early as possible, to minimize the need for a corrected TILA disclosure.
GOOD – Again, the intent is that if fees change at closing then the buyer has time to review them and not feel stuck or cornered into signing at the closing table
BAD – Nothing in the Colorado Purchase Contract states that if the buyer doesn’t like these final fees that they can pull out of the deal. Sure they can delay closing 3 days with the new law…..but nothing in the purchase contract says the seller HAS to extend closing so technically (by my interpretation) the sellers could say the buyer is in default, keep their earnest money, and sell it to someone else after the 3 days passes. This got passed and enacted WAY before the logistics were figured out. If you are buying a home and I’m not your agent….make sure your realtor and lender are in CLOSE communication and not putting you in a bad spot.
If you have questions about how this pertains to your specific situation feel free to give me a shout. I would be happy to talk with you and point you in the right direction – Mike –
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