For Mortgage Shoppers, Simpler Forms Called Biggest Change in 40 Years

By Sarah Kleiner
The Virginian-Pilot

A few changes in the homebuying process that take effect today may have a big impact on how borrowers shop.

Homebuyers will receive fewer forms when applying for financing, and they’re designed to be more understandable, so shopping for an affordable mortgage should be easier.

Also, buyers now will have a three-day waiting period to read and double-check their closing documents before signing a contract.

The Consumer Financial Protection Bureau, a government agency created in the wake of the late-2000s housing collapse, is rolling out the new requirements, which are referred to as “Know Before You Owe.”

“I think it’s really the biggest change in the last 40 years in the mortgage process,” said Holden Lewis, mortgage analyst for

In the past, homebuyers received four forms as part of the closing process, including a good faith estimate and the HUD-1. They have been consolidated into two standardized forms.

Within three days of a prospective buyer’s applying for a mortgage, lenders are required to provide a loan estimate, which is designed to clearly lay out closing costs, Lewis said.

The Consumer Financial Protection Bureau encourages buyers to get at least three loan estimates and compare them side by side.

“When I say consumer-friendly, my 10-year-old grandson could put the one you got and the one I got next to each other and tell the differences,” said Corrina Carter, owner of CMS Mortgage Solutions Inc. in Chesapeake.

Here’s how the loan estimate works:

– The first page breaks down the estimated monthly payment.

– The second page tallies all the estimated fees and other expenses a homebuyer will have to pay, and calculates how much cash a homebuyer has to have at the closing table.

– The third page shows how much the borrower will have paid within five years – and how much of that will have gone toward the principal.

The other new form homebuyers will receive is the closing disclosure. Lenders are required to provide three business days before the paperwork is signed.

The delay gives homebuyers a chance to look through their documents and ask questions if the final costs differ from the estimate.

“Essentially you can see if you are getting the loan that you were promised,” Lewis said. “Right now, comparing the HUD-1 to the good faith estimate, realistically, that’s not happening because the HUD-1 is hard to understand.”

Carter said borrowers likely won’t be as harried at the signing table. Historically, most home sales closed the same day buyers received their final loan documents.

“Right now, everybody feels like they have to accept” the documents, Carter said. “If there are changes that need to be made, it is usually a rush-rush job, and the buyer doesn’t have a chance to review those changes.”

Industry experts have been using the same forms to close on homes since 1974, so it will take time to get used to a new system, said Howard “Hoddy” Hanna III, chairman and CEO of Howard Hanna Holdings. Hanna’s company purchased Virginia Beach-based William E. Wood and Associates in 2014.

The new process likely will extend the amount of time it takes to close a deal beyond 15 or 30 days, which has been typical. Hanna said the waiting period might be 45 or 60 days now.

Still, Hanna said, “anything that’s great for the consumer is good for me and our people.”

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