Know Before You Owe, Understand Your Mortgage

by Dan Lesniak

The home loan process just got better. Whether you are looking to live along the Orange Line or elsewhere, as of October 3rd all lending institutions have new forms which they must provide to consumers. This is all part of the Dodd-Frank Act, which was put in place to hold lenders more accountable and protect consumers from hidden fees and cost changes within loans. Lenders are now required to ensure that all loan applicants Know Before You Owe. This has resulted in two new standardized forms which you must be given no less than three days prior to signing closing documents on a home loan transaction, for a new one or refinancing. The forms, as issued and required by the government, will show you a breakdown of all closing costs and explain clearly all the terms of your loan including any future changes that are worked into them which will affect your payment.

Prior to the big housing bust of 2008, the loan process could be more stressful than finding a new home. Often people would go to sign documents only to be told that there were changes to be applied, from mysterious fees or sudden changes in rates. This resulted in a larger payment for many, or more out-of-pocket costs. Sometimes a loan and deal on a home would fall through because the buyer could no longer afford the loan with the last-minute changes. There were also many buyers who thought they had a great rate and affordable terms, only to find out several years later that the terms specified an adjustment to rates or additional fees being owed, suddenly changing their monthly payment to something beyond their means. This led to a great deal of foreclosures and was one of the key issues which caused the housing market to crash so dramatically.

While the new forms are great news for homebuyers and owners, there is one expected drawback. With the required forms, lenders have spent millions of dollars getting their internal systems and procedures updated to include the calculations which now need to be completed prior to closing a loan. With the new process and additional calculations to be made, loans are expected to take longer to complete. Most home loans average about a month to process. Industry leaders worry that we may begin to see delays up to 60 or 75 days to process a home loan, as a backlog of loans could easily occur. There are a couple of things you can do to help alleviate the possibility of delays.

First and foremost, be sure you have all of your personal and financial documentation up to date and ready before you begin the loan process. This is one of the biggest causes for delays in the process, not having all your information ready. A little advance preparation will save you from a big headache. Another thing you can do is to look into an extended lock on your interest rate. As you go through the loan process, you end up with an interest rate which is locked for a set period of time, usually no more than a month. If the loan takes longer than 30 days to complete, you could be faced with a higher interest rate and larger payment due to market fluctuations. While there is an additional fee to extend the lock on a rate, it could be worth the cost to help guarantee your rate for a longer period of time, especially if we end up in a backlog situation when it comes to processing home loans.

Whatever you do when it comes to buying or refinancing your home, at last you will truly Know Before You Owe. The new rules are in place to help protect you just as I am in place to help you through the process from start to finish. If you are ready to buy or sell your property, myself and the Orange Line Living Team, are here to provide you with our unique and specialized services so you can turn your dreams into reality. To learn more about how we can help you, contact us directly at 571-969-7653 or at [email protected]

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