Consumer Law Center of Maryland
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Changes to Disclosure Requirements Can Help You Get a Loan with Better Terms

Mortgage for home

Historically, borrowers have been limited in how much shopping around they could do prior to committing to a particular lender or set of terms on a mortgage. However, the Consumer Financial Protection Bureau (CFPB) has introduced changes to loan disclosure laws seeking to change that fact. The CFPB’s changes to the rules affecting loan disclosures, known as the “Know Before You Owe” rules, were intended to increase borrower understanding of the true cost of their mortgages before signing, and to offer them a way of obtaining some advantage in the process of shopping for a loan. If you’re beginning the process of purchasing a home, take full advantage of the new disclosure requirements that could afford you a chance to shop around for better terms on your loan.

Loan estimate offers a chance for potential borrowers to shop around

Under the recently-enacted rules, borrowers are now entitled to receive a loan estimate within three days of applying for a mortgage. This document offers applicants a clear and complete rundown of what their monthly mortgage payment would be under the loan, including taxes and fees, as well as what they can expect to pay in closing costs, whether the loan includes balloon payments or prepayment penalties, and whether these payments can increase after the borrower has closed on the loan. The borrower can then use this info sheet both to accurately budget for a new home purchase, and to compare the terms with those of other potential lenders, in order to obtain the best possible terms on their mortgage.

Closing takes longer, but offers greater protections to buyers

In addition to the changed loan disclosures received after applying, buyers will also receive a revised disclosure three days before their loan is scheduled to close. The closing disclosure will alert buyers to the final amount they should expect to pay upon closing, and all locked-in loan costs. Certain changes to the terms of a loan, such as a shift from being a fixed to an adjustable-rate mortgage, a change to interest-only, or the addition of a payment penalty term, will trigger a three-day waiting period that will allow a buyer to consider the changed loan. On average, due to the addition of these three-day waiting periods, closing is expected to last around 45 days, rather than 30.

If you are in the process of purchasing a home, fending off a foreclosure, or refinancing your home in Maryland, contact the experienced and dedicated Germantown mortgage and bankruptcy law firm Haeger Law, LLC for a free consultation on your case, at 888-463-3520.