Lending is a key component in real estate, and on October 3, new lending regulations will go into effect. Lawmakers started shaping these changes with the passing of Dodd-Frank Act in 2010. Just like any major change, it means good and bad news for you, the consumer.
GOOD NEWS ABOUT THESE CHANGES
The changes are nicknamed “know before you owe” since the idea is to provide transparency for home buyers and sellers. The TILA-RESPA Integrated Disclosure (TRID) focuses on creating a lot less paper work.
• Info on the Initial Truth in Lending Disclosure statement and the Good Faith Estimate forms will now be included on a single form called the Loan Estimate.
• Info on the Final Truth in Lending Disclosure statement and the HUD-1 Settlement Statement will now be included on a single form called the Closing Disclosure.
In other words, borrowing money to buy a home will be a simpler process with fewer places that could confuse a borrower, which sometimes leads to more debt than expected. The changes also cuts out the risk of surprises on the way to closing a deal, since disclosures must be presented three business days before closing.
BAD NEWS ABOUT THESE CHANGES
As these changes roll out, lenders are unlikely to take on new business. Cash buyers are going to have a much easier time through at least the rest of 2015 to close a deal, while banks and credit unions adjust to the changes.
The changes also push closing out by as many as six business days for buyers whom rely on financing. Buyers must wait while title companies and lenders interact, meaning their move-in/move-out processes are on hold. Minor changes to these documents will not restart the disclosure period. However, if interest rates are significantly changed while waiting to close, the process can start over.
WHAT TO DO MOVING FORWARD
Stick with your lender. Some buyers choose to switch lenders if they find a better rate after making an offer. After October 3, changing lenders will cause massive delays and could even cause the sale to fall through.
Stay flexible about moving time lines. Most people set a hard deadline to move, especially if they have to give notice as they vacate their current home. After October 3, since a guaranteed move-in date is much harder to pin down, buyers should plan for a range of days instead of one specific date.
Establish trust with the other side. If a seller is represented by an inexperienced team or broker, that could cause delays on your end, and you will have no recourse. Make certain to communicate with the other side of the transaction to avoid complications.
Smaller lenders are best. At PDX Home Group, we feel that larger banks mean larger headaches. There is more red tape and bureaucratic knitpicking at institutions with several officers, managers and other personnel involved with the transaction, so check out smaller lenders or credit unions.
Find the best representation. Some brokers are unwilling to roll with the changes. Some buyer’s agents are great at bringing listings and open houses to their clients, but lack transaction experience.
PDX Home Group delivers prompt, effective services with a full team of brokers whom help you find your ideal home according to your budget and time frame. Our administrative team holds experience with dozens of brokerages, escrow officers, title companies and other parties.
We work full time to push your transaction through, in a way that you understand, so that delays are avoided and a deal closes on time, on budget and ending with smiles on both sides!