What to expect from new closing process changes

New mortgage disclosure rules will take effect October 3, and lenders and real estate brokerages are quickly preparing for what has been predicted to be big changes to home closings.

New lender forms will merge the HUD-1 Settlement Statement, the Good Faith Estimate, and the Truth-in-Lending disclosure form into two new closing documents: a Loan Estimate and a Closing Disclosure.

“There’s going to be a little bit of a learning curve in the beginning,” said Matt Culp of the Bainbridge Lending Group on 97.3 KIRO-FM’s “Real Estate Today” program. “Consumers may face slightly longer closing times as the industry adjusts to the new process.”

Consumers will have more time to review the total costs of their mortgage prior to closing. The Loan Estimate form is due to consumers three days after they apply for a loan, while the Closing Disclosure form is due three days prior to closing. The Loan Estimate form shows the loan amount and interest rate, what the borrower’s monthly payment will be, estimated taxes and insurance, and how much cash is required to close.

Borrowers will face delays to closing if there are any last-minute changes with the financing of their loan. For example, if borrowers decide to change loan products at the last minute – such as switching from a fixed-rate mortgage to an adjustable-rate loan – borrowers will face a three-day delay in the closing to allow for reviews of the new Closing Disclosure form. Borrowers will not have a choice to waive the three-day review period.

Some mortgage experts are recommending that borrowers lock in their mortgage rates 45 or 60 days, rather than the more common 30-day lock, in case there is any delay in closing.