Mortgage closing


Know Before You Owe: Closing Disclosure

Loan Estimate blog

After you’ve shopped around for a mortgage and requested at least three Loan Estimates, compared the offers, and picked your loan, for most mortgages you’ll get a Closing Disclosure, at least three business days before closing.

The Closing Disclosure is a five-page form that helps you understand the key features, costs, and risks of your mortgage loan. If you applied for a loan on or after October 3, 2015, the Closing Disclosure will replace the HUD-1 Settlement Statement and Final Truth-In-Lending (TIL) forms for most mortgages.

The Closing Disclosure is a key part of our Know Before You Owe mortgage disclosure rule. To create this form we combined the two federal mortgage disclosures listed above. We tested this form with consumers and discussed the changes with industry. As part of the rule we also added new timing requirements, so you have time to review your loan terms. These changes make it easier to understand the terms of your mortgage before signing on the dotted line.

To help you understand your Closing Disclosure, we’ve created an interactive sample form. This resource helps you double-check the details and get definitions for unfamiliar terms. To make sure you’re prepared for closing, review your Closing Disclosure carefully and get our closing checklist, available in the “Owning a Home” suite of tools and resources for homebuyers.

When you’ll get your Closing Disclosure

During our work on the Know Before You Owe mortgage initiative, we reached out to loan officers, consumers, real estate professionals, and attorneys to learn about the process of closing. We learned that the documents are often hard to understand, overwhelming, and there isn’t enough time to review them.

Our rule requires lenders to send you the Closing Disclosure at least three business days before you finalize your loan. This gives you time to compare your Closing Disclosure to your Loan Estimate and ask your lender, your housing counselor, or your attorney any questions you may have.

More Resources

While our new forms are easier to understand, the mortgage process can be confusing and filled with complex terms. To help you navigate we’ve created a set of resources to help.

  • Interactive sample Closing Disclosure – Want to know where to find a particular fee, or how much money you will have to bring to the closing table? This interactive resource helps you understand the form. We’ve also made one for the Loan Estimate. These resources guide you through the forms by highlighting key information and defining terms.
  • Owning a Home” – This suite of tools and resources takes you through the process of buying a home. Here you will get detailed explanations of how to go about getting a mortgage and what to consider when making decisions. You’ll also find tools and resources to help you learn more about your options, make decisions, and prepare for closing.
  • Your Home Loan Toolkit” – This booklet has worksheets and conversation starters to help you navigate the mortgage process. You can fill it out on your computer or print a copy from our site.
  • Find a Housing Counselor – Housing counselors approved by the U.S. Department of Housing and Urban Development (HUD) can offer independent advice about whether a particular set of mortgage loan terms is a good fit based on your objectives and circumstances, usually at little or no cost to you. Find a housing counselor near you with our search tool.

To learn more about the Closing Disclosure, visit consumerfinance.gov/knowbeforeyouowe. You can also learn more about the Loan Estimate on our blog.

This post was originally published on the Consumer Finance Protection Bureau's blog. Link: http://www.consumerfinance.gov/blog/know-before-you-owe-closing-disclosure/ Author: David Friend

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Owning A Home: The homebuyer’s trusted resource

Owning A Home: The homebuyer’s trusted resource

When you first receive the keys to your new home, it can be exciting. And, for most people it’s a relief, because the process to get to this moment has taken months, maybe even years. We know getting a mortgage and buying a home isn’t always easy, with many forms to fill out and decisions to make.

At the CFPB, we are working to make the process of getting a mortgage simpler and easier to understand. Our goal is for you to know before you owe. Part of that work is a new rule that improves disclosure forms; another part is giving you comprehensive and trustworthy resources to guide you through the mortgage process.

That’s why we’ve created “Owning a Home,” a suite of tools and resources on our website. We first launched “Owning a Home” in January 2015. Last week we updated “Owning a Home” with a detailed guide to the mortgage process. Our guide is interactive and easy to use. It offers you clear actions to take and questions to ask every step of the way.

Here’s why “Owning a Home” is the place to come when you want to buy a home.

1. It helps you get prepared financially.

Getting your finances ready for homeownership can be a challenge. “Owning a Home helps you assess your spending and learn how to check your credit. We’ve created a monthly payment worksheet that will help you figure out how much you can spend on a monthly mortgage payment.

2. It helps you shop for a mortgage, not just a home.

Finding your perfect home can be a challenge: would you rather have the home with four bedrooms and a spacious lawn or the home with two bedrooms and a shorter commute? Equally important for you to consider is what kind of loan makes the most sense for your circumstances. You’ll want to start meeting with lenders to explore your options. “Owning a Home” guides you through this process, helps you know what questions to ask when meeting with lenders, and helps you gather the paperwork you’ll need to move forward.

3. It helps you compare loan offers and choose a loan.

After finding the home you want, it’s time to get official Loan Estimates. The Loan Estimate is the form you’ll receive when you apply for most mortgages on or after October 3, 2015. We recommend getting at least three different Loan Estimates and comparing them to find the offer that is best for you and your family. “Owning a Home” features an interactive sample Loan Estimate that helps you double-check the details and get definitions for terms you may not understand.

4. It helps you navigate the process and the paperwork to close with confidence.

Once you choose a loan, you’ll have to provide documentation of your financial information to your lender. You’ll also receive important documents detailing the final terms of your loan. “Owning a Home” has a checklist to help you through the closing process, an interactive sample Closing Disclosure form, and a guide to other key documents you will receive at closing. Review all of your documents in advance of closing so you can ask questions and know before you owe.

5. It helps you every step of the way.

“Owning a Home” helps you through all stages of the mortgage process. It helps you decide if buying a home is the right choice for you now, it helps you understand what you need to do to get a mortgage, it helps you find the best offer, and it helps you close the deal. The unbiased tools and resources help you make smart decisions as you prepare for your future as a homeowner.

The newly updated “Owning a Home” site still includes all of our previously released tools and resources, including our guide to understanding loan options, our tool to help you explore interest rates, and our closing checklist.

If you’re thinking about becoming a homeowner or just curious about what’s involved in getting a mortgage, “Owning a Home” is a great place to come to understand the process and learn how to get started.

This post was originally published on the Consumer Finance Protection Bureau's blog. Link: http://www.consumerfinance.gov/blog/owning-a-home-the-homebuyers-trusted-resource/ Author: Megan Thibos and Maggie Anderson

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Know Before You Owe: Making the mortgage process easier for you

Know Before You Owe: Making the mortgage process easier for you

Since opening our doors over four years ago we’ve heard from homebuyers that the process of buying a home is overwhelming and confusing. We’ve heard that closing is often rushed, not allowing enough time to review before signing on the dotted line. For consumers who apply for most mortgages on or after October 3, 2015, the stress of shopping for a mortgage will be reduced, as our new mortgage disclosure rule takes effect. The new rule and disclosures ease the process of taking out a mortgage, helping you save money, and ensuring you know before you owe.

Here’s what will change:

  • Four overlapping disclosure forms will be streamlined into two forms, the Loan Estimate and the Closing Disclosure.
  • You’ll have more time to review your closing documents. Currently, lenders must give you your HUD-1 Settlement Statement disclosure 24 hours in advance, if you request it; after October 3, you’ll receive your Closing Disclosure three business days before you sign the forms and accept the terms of your mortgage, no request needed.

Here’s how these changes will improve the mortgage process:

  • The new forms will make it easier to understand complicated mortgage terms.
  • The Loan Estimate makes it easier to shop around and compare loan offers from multiple lenders. Consider applying for loans from at least three lenders before choosing a mortgage so you can find the best deal for you.
  • The three days required between getting your Closing Disclosure and signing on the dotted line allow you to make sure there aren’t major changes from the deal you were offered on your Loan Estimate. It also gives you time to ask your lender all the questions you might have about the terms of your mortgage and consult with a lawyer or housing counselor.

More resources to help make mortgages understandable

We’ve released “Your Home Loan Toolkit.” The toolkit has worksheets and conversation starters to help you at key points in the mortgage process. You’ll receive the toolkit when you apply for a home purchase mortgage. However, you can also download it now.

In addition, while these forms make the process of taking out a mortgage easier, we have also created digital resources to help you use and understand your Loan Estimate and Closing Disclosure. These tools give you definitions of terms like “balloon payments” and “points.” They also show you where to look, page-by-page, to check that terms and numbers on both documents match up.

For a better understanding of what it takes to get a mortgage, we’ve updated our “Owning a Home” site with an overview of the mortgage process. This step-by-step guide to getting a mortgage takes you from creating a budget to filing away your important closing documents after you accept the terms and sign on the dotted line. “Owning a Home” also has tools and resources to help you learn more about your loan options, make decisions, and prepare for closing.

Housing counselors approved by the U.S. Department of Housing and Urban Development (HUD) are another great resource. They can offer independent advice about whether a particular set of mortgage loan terms is a good fit based on your objectives and circumstances, often at little or no cost to you. To find a housing counselor near you, use our search tool.

The new forms work

Over the past four years, we’ve done extensive work, including testing the new forms with consumers around the country and getting feedback from industry. In our testing, we determined that these new forms helped people better understand the terms and types of mortgages in the market.

From our very first day as an agency, we’ve been working hard to improve your experience when it comes to purchasing and paying for your home. We’ve been working to make the market safer by educating mortgage consumers, challenging practices that are illegal under federal consumer protection law, and by enacting new mortgage lending rules. In addition, we’ve worked to get responses to your mortgage complaints, and we’re exploring ways to further improve the closing experience.

You have the right to compare offers and understand the terms before you sign on the dotted line. And the information you use should be clear and easy to understand. After four years of work, these new forms and tools will help you shop for the best deal and avoid costly surprises when you sign on the dotted line.

The mortgage process is easier when you know before you owe.

This post was originally published on the Consumer Finance Protection Bureau's blog. Link: http://www.consumerfinance.gov/blog/know-before-you-owe-making-the-mortgage-process-easier-for-you/ Author: Patricia McClung

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Three things to do before closing: What we learned from studying eClosing

eClosing graphic

We’ve heard from many consumers about the overwhelming process of closing on a mortgage, which can be confusing and difficult. Closing is the part of the mortgage process where you accept the terms of your loan, the last step before you owe, and usually before you owe more than you ever have in your life.

As part of our broader efforts to improve the overall mortgage experience, we’ve been exploring how technology can be used to address some of those pain points in the closing process.

Today we’re releasing the results of a pilot program where we explored tools and process changes that can help consumers better navigate closing by accessing and signing their closing documents in different ways. Specifically, we examined what would happen if there was more technology involved in the mortgage closing process, with documents being delivered electronically earlier together with online tools and resources. The electronic delivery and signing of closing documents using electronic signatures is sometimes referred to as eClosing.

We wanted to study the idea that by using technology as a tool, consumers may be better informed and prepared – putting them in the driver’s seat at closing.

What we found

Though our data is based on a limited sample of borrowers, we learned that borrowers experiencing eClosings on average scored higher on the pilot measures of empowerment, understanding and efficiency in the closing process, when we compared them to borrowers not using these elements of technology to close on their mortgage.

As the mortgage industry continues to take on eClosing and various innovations that help make such a complex process easier for you—the consumer—to navigate, we have three takeaways from this study that can help you with your mortgage closing, regardless of what closing process is available to you by your lender.

1. Ask for more of your closing documents before you get to the closing table

Consumers who participated in our pilot and received and reviewed documents before the closing meeting reported that they felt they had a clearer understanding of their loan and were less confused by the mortgage process than those who did not review the documents early.

As a part of our Know Before You Owe mortgage initiative we are working to give consumers more time to review the new mortgage disclosure called the Closing Disclosure. On October 3, 2015, our new mortgage disclosure rule will require that for most mortgages, consumers get their Closing Disclosure at least three days before closing. This new Closing Disclosure is a consumer-tested summary of your loan that gives you all of the final loan terms in one place before you sign on the dotted line. However, the Closing Disclosure will be one of many closing documents you will receive.

Ask your lender if you can see documents like the Promissory Note and the Security Instrument ahead of your closing. If you applied for a mortgage on or after October 3, 2015, use the new Closing Disclosure as the “executive summary” of your closing. Learn more about the key closing documents you can expect at Owning a Home, our suite of tools and resources for homebuyers.

2. Take time to review your closing documents in advance

The stack of documents at closing can be overwhelming. Reviewing these ahead of time allows you to focus on key documents ahead of your closing so you feel less anxious that you’re missing something buried in your closing stack.

Consumers in the pilot who received their closing documents in advance of closing and found errors on their closing documents were more likely to flag and ask for corrections on errors before they got to the closing meeting. Those in the pilot who reviewed their documents early were also less likely to say that they felt rushed during their closing meeting. Since these borrowers had the documents early, the “closing” effectively started days before meeting, and borrowers had time to ask questions before they signed on the dotted line.

3. Know about the mortgage process before you owe

Consumers in the study who used the CFPB’s educational tools such as Ask CFPB, a database of commonly asked financial questions, and our closing checklist found in Owning a Home, were more likely to feel that they could play an active role in their closing process than those who didn’t. Consumers who used some of these tools were also much more likely to report stronger agreement on statements like “I had a clear understanding of why the costs outlined in my initial Good Faith Estimate were different than my final closing costs.”

While our study is over…..

We’ll continue to promote consumer-friendly solutions in the mortgage process. In particular, we hope that the use of technology in the closing process is studied further by both the industry and government to see how it can potentially improve a borrower’s mortgage closing experience even more.

As eClosing continues to be studied and implemented, remember, you can use many of the principles we used in our study to improve your own closing.

Check out our full report to learn more about the pilot.

This post was originally published on the Consumer Finance Protection Bureau's blog. Link: http://www.consumerfinance.gov/blog/3-things-to-do-before-closing-what-we-learned-from-studying-eclosing/ Author: Patricia McClung