Could New Lending Rules Create A Disaster?
In an effort of full disclosure the lending world is adding a few “buyer friendly” practices…
What are they?
- When making application with a lender a buyer must receive a set of disclosures including a Good Faith Estimate & a Truth In Lending Statement within 3 days…
- After receipt of the disclosures the buyer CANNOT close the loan within 7 days (including Saturday).
- * The Biggest * If the APR changes before settlement from the time of disclosure by an 1/8th of a point then a new disclosure must be given and the 3 day period starts all over.
Do these rules really change much?
Possibly not, if you know what to expect and you plan ahead. If not, or if your Realtor doesn’t have a clue of these changes, you could end up in trouble…
2 examples situations…
A. Billy has asked for the seller to credit him 10k for closing cost. He only needs 9k. The day before settlement he decides to use the extra 1k to buy down his interest rate so he doesn’t loose his 1k. This changes the APR by more than 1/8th so to make this change would delay settlement causing him to be in default.
B. Anne is a buyer who likes to gamble on interest rates decreasing so she doesn’t lock in her rate with her lender. She already has her disclosure but then wants to make last minute interest rate changes (usually before 5 days prior to settlement), then she will have another settlement issue.
What to do???
This change shouldn’t cause too many issues if buyers are prepared. Overestimating closing cost requests, last day of the month settlements, and not locking in interest rates in a timely fashion could soon become a thing of the past.
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