The new mortgage process and timelines

On July 30, 2009, the new Housing and Economic Recovery Act (HERA) regulations go into effect. They require all mortgage lenders and brokers help prevent deceptive lending practices and protect customers by helping them become more informed. But these new requirements could impact your eventual transfer of ownership. If you're financing the property, these new regulatory and investor guidelines will impact — and could even dictate — the closing date.

#1 - Purchase contracts can still be written with a specific closing date in mind, but it's recommended you plan on at least a 30-day close. Going forward, the earliest any “rush” transaction for a home purchase can close is about 7 business days after initial mortgage disclosures have been issued.

#2 - Upfront fees cannot be collected by the lender until you receive the initial disclosures. Fees are needed to order the credit report, appraisal and get the process underway. Upfront fees can be collected immediately when the application is taken face-to-face and the homebuyer receives his or her initial disclosures.

#3 - As a Buyer, you must be provided with a copy of the appraisal a minimum of 3 business days prior to closing. If, for whatever reason, you (the homebuyer) believe the 3-business-day required review period is NOT necessary, you have the right to waive that requirement upfront.

#4 - An increase of more than .125% in the Annual Percentage Rate (APR) from the initial disclosures requires the truth in lending (TIL) to be revised and reissued to the homebuyer at least 3 business days before closing.

Your Role As the Homebuyer

- Obtain a credit-checked pre-approval before shopping for a home. (Applying face to face may help expedite the process.)

- Review the timeline and potential impacts with your home mortgage consultant in order to keep your REALTOR® or Builder informed. Again, it's wise to plan for at least a 30-day close.

- Review the appraisal delivery disclosure with your lender and determine whether or not you wish to waive the 3-business-day review period prior to closing.

- Understand that the interest rate on the loan impacts your APR. This means that until you lock on the rate, an exact APR cannot be determined.

- Plan to lock your loan a minimum of 10 business days prior to your desired closing date.

- Know that a change in your mortgage product, the addition of a home equity loan or line of credit, etc. could impact the APR and, therefore, the estimated closing date.

- Understand that changes in fees by third parties, such as the settlement agent, could also impact your closing date.

The various impacts of these new regulations and investor requirements should be outlined in your initial mortgage disclosure packet. Any questions should be discussed with your home mortgage consultant. And know that these new regulations and investor requirements are in place to ensure you have time to consider your loan choice and feel confident to move forward.

-MDS