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Loan Disclosure Procedures Things are no longer as simple as they used to be when it comes to obtaining a mortgage to purchase a home. That is saying something, considering that the process was never the easiest to understand to begin with. Today with new procedures for loan disclosures being implanted, the tide has changed a bit. Borrowers are well aware how mislead many were in the past regarding what type of loan would work best for their situation and they are therefore asking a lot more questions. Many borrowers are finding that they must ask more questions than ever and read the fine print to a fault. It may not be the most interesting task there is; but potential home owners feel that they must read everything if they don’t want to wind up in a bad situation.
January 1st, marked the start of the new “Good Faith Estimate” forms. Although these forms have been simplified from years past, borrowers should still ask the following key questions: “What are my final closing costs?”, “If I have a variable loan, what is the highest rate I may be charged?”, “How many years do I have before my variable rate loan changes?”, among others. These questions are now answered plainly and clearly on the new Good Faith Estimate form; just one way the government has helped lenders understand the new loan disclosure procedures. This document must be signed by the potential home owners before the underwriters get started processing any documents.
Many brokers have noticed that the governments new assistance regarding explaining the loan process has put many borrowers at ease. At the same time, due to recent events in the housing sectors, many borrowers are still asking more questions than they’ve ever done before; 50% more by some estimates. Homeowners old and new are arming themselves with as much information as possible, before making such a large purchase. Home buying has now become more of an open book than ever and the disclosure of these procedures are truly a good thing for new home buyers. In years past home buyers just weren’t asking questions and it’s most likely because they weren’t as suspicious of the industry as today’s consumers are. The burst bubble in the market had many potential home buyers running scared and leery of anyone trying to sell them any loan products.
The government saw this need and made sure that the loan disclosure procedures are such that borrowers are informed of exactly what the loan process entails. However all are not convinced that this has helped a great deal. In fact many say that the questions new mortgage borrowers asked are not few, but just different. Some even mention that some borrowers actually prefer the old process with the previous Good Faith Estimate. Many in the banking industry comment about the new time consuming process that it takes to explain these new disclosures to potential borrowers. This process however is a help to borrowers as they must confer with the 3rd party entities involved in the process. For instance attorneys and title companies have to be conferred with before the forms can be delivered to the borrower. The government has done a good job in working on the side of borrowers in this instance, many note. Although time consuming, for those who take the time to understand the process, they will be left with few surprises.
This new allotment of time may be up to five business days and because closing costs are posted until the final estimate, these guaranteed quotes from the 3rd parties involved are crucial. If something changes, then new disclosures forms are issued. The Good Faith Estimate is then signed by the potential home owners and an appraisal is ordered. Many feel this extra time can also cost borrowers extra funds. However it is up to the potential home owners to make an unbiased decision on just how helpful the new loan disclosure procedures work for them.
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