Your Rights And Rules For Closing Disclosures

 

The Closing Disclosure documents the actual terms of your loan transaction. You should receive it no later than 3 business days before consummation. It must be in writing – paper or digital.

If the loan terms or costs change prior to consummation, your lender must provide a corrected disclosure AND an additional 3-business-day waiting period until loan consummation.

Waiving the 3-day waiting period is only permitted in certain circumstances, and only when the waiting period would cause a bona fide personal financial emergency.

Understanding Loan Estimate Comparisons

 

Page 3 of your Loan Estimate includes measures to help you compare loans.

“In X Years” shows the total amount you will have paid in that time, and the dollar amount applied to your loan principal. The ratio between total paid and principal reduced may change over time.

The APR shows interest PLUS fees as an annual ratio – APR is the actual percentage this loan costs per year.

The TIP figure relates the interest you will pay over the life of the loan to the loan amount. For example – a TIP value of 25% on a $100,000 loan means you will pay $125,000 – $100K principal plus $25K interest – over the life of the loan.

Understanding Your Loan Estimate: Other Costs

 

Real estate transactions require taxes, certain pre-payments, and escrow funding.

Recording fees are charged by government agencies for keeping legal ownership records, while “transfer taxes” may be imposed by states, counties and municipalities on real estate ownership transfers.

Prepayments may include homeowner’s insurance premiums on the property mortgage insurance, if required property taxes for a period of months in advance, and prepaid interest, typically for the period from closing to the first mortgage payment.

Escrow funding may also be required against future annual charges for homeowners insurance, mortgage insurance and property taxes.

Title insurance on YOUR legal ownership – “Owner’s Title Policy” – may be designated as optional, which only indicates that it is not required by this creditor.

Some of these “Other Costs” may vary substantially between Loan Estimate and Closing Disclosure ask your lender about the tolerance rules or watch the video “Could My Loan Cost Exceed The Loan Estimate?”

Understanding Your Loan Estimate: Services You CAN Shop For

 

These costs are paid to outside parties and YOU are free to shop and compare providers for a variety of services. These might include pest inspection, or  a survey to verify property lines or a range of Title-related services.

Title services might include:

  • a Lender’s title policy, which protects their legal interest in their loan collateral- usually the property itself
  • settlement agent fees, paid to the individual or company responsible for facilitating the final transaction
  • Title Search, which clarifies and documents legal ownership of the property
  • a title insurance binder, which allows potential future use of the current title search results, conditions and exclusions for a short period to lower the cost of future title insurance.

If you select service providers from the list provided by the lender, their fees cannot change by more than 10% between the Loan Estimate and the final Loan Disclosure. If you select other providers the lender is not responsible for changes in those costs.

Understanding Your Loan Estimate: Services You Cannot Shop For

 

These costs are paid to outside parties, not the lender, but you don’t get to choose them. They may include:

  • appraisal, which puts a value on your property on the lender’s behalf
  • a credit report on you
  • fees to assess flood risk of your property, or for ongoing monitoring of flood zone changes related to your property
  • tax monitoring to keep track of your property tax payments
  • tax status research to assess the state of tax payments on the property.

While you can’t shop for these services, the price for these services in your final loan disclosure MUST match the price on the Loan Estimate; items in “Cannot Shop” have 0 tolerance for change.

Understanding Your Loan Estimate: Page 2, Loan Costs

 

Closing costs are fees paid when the title of the property is transferred to the buyer making them the legal owner.

Origination Charges are fees collected by the lender for the loan process. They may including fees for handling the loan application and “Origination Fees”, which are compensation paid by the creditor to the entity that originated your loan.

“Points” are fees paid to lower interest rates; points are considered prepaid interest for the buyer, and are usually tax deductible.

Finally, Underwriting is a payment to the lender for their assessing the risk that the loan might not be repaid, based on the loan specifics and your financial characteristics.

Understanding Your Loan Estimate: Terms, Payments and Closing Costs

 

The first page of your Loan Disclosure shows the Loan Terms Projected Payments and Costs at Closing.

The Loan Amount, of course is the total you are borrowing. But the Interest Rate alone doesn’t represent all of your borrowing costs. The APR figure on Page 3 shows that.

Likewise, Monthly Principal & Interest aren’t the complete amount you will actually PAY each month.

The Projected Payments figures add other costs, such as Mortgage Insurance Estimated Escrow, Taxes, Insurances and Assessment to show the approximate amount you will pay each month, over time.

The Estimated Closing Costs are directly loan-related. while the Estimated Cash to Close adds other known closing costs to tell you the estimated cash you’ll need to have to close this loan.

Can My Settlement Charges Change?

 

Yes, if circumstances change, such as:

  • a natural disaster damages the property or affects closing costs
  • the title insurer providing the estimate goes out of business during underwriting
  • new information on you or the transaction affecting settlement is discovered.

If any of these events change 3rd-party charges beyond the 10% tolerance limit creditors may issue a revised Loan Estimate.

If a creditor issues a Loan Estimate they are presumed to have collected all 6 pieces of required information. They may not claim a change in circumstances by receiving one of these pieces of information AFTER issuing a Loan Estimate.

Can Creditors Revise TRID Loan Estimates?

 

Creditors are generally bound by the initial Loan Estimate. They are permitted to provide a revised Loan Estimate only under certain changed circumstances. These include circumstances that:

a) increase settlement charges beyond the legal tolerance limits

b) affect YOUR eligibility or change the value of the loan security.

Also,

c) if the interest rate was NOT locked and the new rate changes points or lender credits

d) for settlement delay on new construction loans within the stated revision window – typically 60 days, or

e) if YOU indicate an intent to proceed more than 10 business days after the Estimate or request loan term revisions.

Changed circumstances are extraordinary events beyond the control of you or the lending parties, OR changes or inaccuracies revealed in the information the lender used in preparing the Loan Estimate, OR new information on you or the transaction that the creditor did not use in the Loan Estimate.

What’s Refunded If My Loan Is Higher Than My Estimate?

 

If the amount you pay at closing exceeds the amounts disclosed on the Loan Estimate – beyond tolerance limits for each category – the creditor must REFUND the excess to you no later than 60 calendar days after loan consummation.

For charges subject to a 10% cumulative tolerance fees greater than 10% of the Loan Estimate for the same charges must be refunded.

For fees paid for 3rd party services which the creditor did NOT permit you to shop the FULL amount over the estimate must be refunded.

For charges subject to ZERO tolerance including fees paid to the creditor mortgage broker or their affiliates any amount beyond the Loan Estimate must be refunded.