What Do Lenders Have To Tell You About Your Real Estate Loan? Federal disclosure forms define the information that creditor businesses MUST provide to consumers applying for real estate loans. As of August 1, 2015 lenders must provide TWO New TRID disclosure forms. for the most common kinds of real estate loans First, the Loan Estimate, which covers the key features, costs and risks of a mortgage loan. For an approved loan this must be returned to the consumer within 3 business days of loan application. If the loan goes forward, the Closing Disclosure form, covering key transaction costs, must be delivered at least 3 business days before loan consummation.
What Is A Business Day?
What Is A Business Day For Real Estate Loan Disclosures? Business day is defined slightly differently for Loan Estimates and Closing Disclosures. For Loan Estimates, each day on which a creditors offices are open to the public count as a business day. Loan estimates must be delivered or placed in the mail no later than the 3rd business day after receiving your loan application. For Closing Disclosures, a business day is defined as all calendar days except Sundays and the Federal public holidays The Closing Disclosure must be provided to you at least 3 business days PRIOR to loan consummation.
What Does The Loan Estimate Tell You?
What Will The TRID Loan Estimate Tell Me? The Loan Estimate documents the essential facts and terms of an approved real estate loan. It includes loan terms, projected payments and loan costs; cash and costs at closing time; the services for which you CAN and CANNOT shop in relation to the loan; summary information with which to compare this loan to others and other important details such as appraisal, insurance, late payment, refinancing, loan assumption policy and whether this lender intends to service this loan. The Loan Disclosure is a dynamic form; it will include information that IS related to YOUR loan and may leave out information that is NOT so forms from different lenders or for different loans may not look identical.
When Do I Get My Closing Disclosure?
When Do I Get My Loan Closing Disclosure? If an eligible loan proceeds from Estimate to closing, creditors must provide a Closing Disclosure form documenting the actual transaction terms and costs THREE business days before consummation. It must be in writing, whether paper or digital, and disclose ONLY the information specified by the CFPB. If terms or costs change prior to consummation the creditor must provide a corrected disclosure containing the updated terms. In some cases, this may require an additional 3-business-day waiting period to consummation. Consummation and Closing are legally distinct although they may occur at the same time depending on applicable State laws. Consummation occurs when you become contractually obligated to the CREDITOR on the loan not, for example, the real estate seller. The Disclosure must be delivered three business days prior to the legal Consummation date.
Calculating Your Cash To Close
Calculating Your Cash To Close Page 2 of the Loan Estimate provides the current ESTIMATED cash to close. Some costs will stay the same between estimate and closing. Some will change. A - Origination Charges - should match. B - Cant Shop - 10percent Tolerance C - Can Shop - no tolerance limit, BUT IF you select a provider from your lenders list their actual cost should be no more than 10percent greater than the estimate. E - Recording Fees are also subject to 10percent tolerance F - Prepaids, G - Initial Escrow and H - Other, such as Owners Title may vary from the Loan Estimate without tolerance limits. These estimates of closing costs plus loan details, Down Payment, Deposits Credits and Adjustments are used to calculate your estimated cash requirements when the loan finally closes. Consider the possible changes and tolerances when evaluating a loan decision.
How To Make An Offer
Watch this video and it will make sense. Your real estate agent will assist you in making an offer which will include the following information:
- The Complete legal description of the property
- The Amount of earnest money
- The Down payment and financing details
- The Proposed move-in date
- The Price you are offering
- The Proposed closing date
- The Length of time the offer is valid
- The Details of the deal
Key Issues Before Buying A Home
Watch this video and take a few notes! Always check to see if the house is in a low-lying area in a high-risk area for natural disasters like earthquakes, hurricanes, tornadoes, etc. or in a hazardous materials area. Be sure the house meets building codes. Also consider local zoning laws which could affect remodeling or making an addition in the future.
What Is Ability To Repay?
What are the Ability to repay rules about? In a nutshell, as this video shows, new laws require lenders to make a good-faith assessment of a borrowers capacity to pay back their loan over time. It is a longer-term view that goes beyond immediate income, debt and credit rating. These new Federal laws- supervised by the CFPB - require lenders to ask more questions - about income, assets, employment, credit history, and monthly expenses - as they relate to the proposed loan. For example, a lender offering a mortgage with a low initial rate must try to assess how a borrower will handle the later, higher rate as well. If you are applying to borrow ask whether the program you are considering is a Qualified Mortgage Ability-to-repay rules are built in to loans that meet Qualified Mortgage guidelines.
Determining Your Initial Offer
As you will see in this video, unless you have a buyers agent remember that the agent works for the seller. Make a point of asking him or her to keep your discussions and information confidential. Listen to your real estate agents advice but follow your own reason on deciding a fair price. Calculating your offer should involve several factors: what homes sell for in the area, the homes condition, how long it is been on the market, financing terms and the sellers situation. By the time you are ready to make an offer you should have a good idea of what the home is worth and what you can afford. Be prepared for give-and-take negotiation which is very common when buying a home. The buyer and seller may often go back and forth until they can agree on a final price.
Be There For Inspection?
It is not required, but it is a good idea. As this story shows, let the inspector do their job while you take notes and pictures. Following the inspection the home inspector will be able to answer questions about the report and any problem areas. This is also an opportunity to hear an objective opinion on the home youd like to purchase and it is a good time to ask general maintenance questions.
What's An Inspection Clause?
Remember these pointers from the video: you may want to include an inspection clause in the offer when negotiating for a home. An inspection clause gives you an out on buying the house if serious problems are found or gives you the ability to renegotiate the purchase price if repairs are needed. An inspection clause can also specify that the seller must fix the problem(s) before you purchase the house.
Do I Need A Lawyer To Buy?
As we show you in this video, laws vary by state. Some states require a lawyer to assist in several aspects of the home buying process while other states do not as long as a qualified real estate professional is involved. Even if your state doesnt require one you may want to hire a lawyer to help with the complex paperwork and legal contracts. A lawyer can review contracts make you aware of special considerations and assist you with the closing process. Your real estate agent may be able to recommend a lawyer. If not, shop around.
Learn Your Community Resources
The video puts this in more visual terms, but basically, contact the local Chamber of Commerce for promotional literature or talk to your real estate agent about welcome kits, maps, and other information. You can get information about school systems by contacting the city or county school board or the local schools. You may also want to visit the local library. It can be an excellent source for information on local events and resources and the librarians will probably be able to answer many of the questions you have.
What If You Feel Excluded?
Like the video says, immediately contact the U.S. Department of Housing and Urban Development (HUD) if you ever feel excluded from a neighborhood or particular house. Also, contact HUD if you believe you are being discriminated against on the basis of race, color, religion, sex, nationality, familial status, or disability. HUDs Office of Fair Housing has a hotline for reporting incidents of discrimination: 1-800-669-9777 and 1-800-927-9275 for the hearing impaired.
Determining Your Housing Needs
Like the video shows, your home should fit the way you live, with spaces and features that appeal to the whole family. Before you begin looking at homes make a list of your priorities - things like location and size.
- Should the house be close to certain schools? your job? to public transportation?
- How large should the house be?
- What type of lot do you prefer?
- What kinds of amenities are you looking for?
How Lenders Decide Your Maximum Loan
As you will see in the video, the lenders consider your debt-to-income ratio, which is a comparison of your gross (pre-tax) income to housing and non-housing expenses. Non-housing expenses include such long-term debts as car or student loan payments, alimony, or child support. According to the FHA, monthly mortgage payments should be no more than 29% of gross income, while the mortgage payment, combined with non-housing expenses, should total no more than 41% of income. Lenders also consider cash available for down payment and closing costs credit history and the rest of your financial picture when determining your maximum loan amount.
Am I Ready To Buy?
As you will see in this video, you can find out by asking yourself some questions:
- Do I have a steady source of income (usually a job)?
- Have I been employed on a regular basis for the last 2-3 years?
- Is my current income reliable?
- Do I have a good record of paying my bills?
- Do I have few outstanding long-term debts, like car payments?
- Do I have money saved for a down payment?
- Do I have the ability to pay a mortgage every month, plus additional costs?
Purchasing Vs Renting A Home
Like the guy in the video says, the two do not really compare at all. The one advantage of renting is being generally free of most maintenance responsibilities. But by renting, you lose the chance to build equity take advantage of tax benefits and protect yourself against rent increases.Also, you may be at the mercy of the landlord for housing. Owning a home has many benefits. When you make a mortgage payment, you are building equity increasing YOUR net worth. Owning a home also qualifies you for tax breaks that assist you in dealing with your new financial responsibilities like insurance, real estate taxes, and upkeep which can be substantial. But given the freedom, stability, and security of owning your own home they are worth it.
Steve is not only a highly knowledgeable realtor, but has provided clever home purchasing tips along the way. These tips have been very helpful for us in making a lot of our financial decisions. This is our 3rd home purchase and 2nd home sale since 2012 (we hope to settle down this time....lol), but have not had as good as an experience ever before!
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CalBRE Broker Number: 01527235
190 Hartz Avenue, Suite 200, Danville, CA 94526