Effective October 2015, new laws make it necessary for residential property investors to sign a set of entirely new documents as part of the mortgage process. These laws are intended to protect buyers from fee abuse, and they’ve been drafted in conjunction with the Real Estate Settlement Procedures Act (RESPA) and the Truth in Lending Act (TILA). As such, all mortgage rate and fee disclosures of the past have been combined into two comprehensive and easy-to-understand forms. These documents clearly define mortgage terms and rules so that buyers know exactly what they’re taking on.
The Loan Estimate
By law, you must be presented with your loan estimate within three days of having formally submitted a loan application. This document is now used instead of the Good Faith Estimate that buyers once received. It lists the buyer’s projected mortgage payments over the lifetime of the loan and provides a breakdown of the related mortgage terms and line item closing costs.
The Closing Disclosure
The Closing Disclosure should be in your hands three days before your mortgage closes so that you have ample time to review it. This new document replaces the HUD-1, which is commonly referred to as the Final Settlement Statement. Although it closely mirrors the Loan Estimate, it provides a complete breakdown of all costs that buyers, sellers, and third parties must pay. You will ultimately be receiving much of the same information that was originally presented in your loan estimate with the opportunity to study these details ahead of the actual closing. This is the time to learn more about the timing rules that both you and your lender must adhere to when closing the transaction. These rules will give you a better understanding of how long it will take to bring the mortgage process to completion once you decide to purchase a home for sale in Irvine.
Signing Your Loan Documents
Once you have reviewed and approved the terms of the Closing Disclosure, you will be ready to sign a complete set of loan documents. The two most important of these is the Promissory Note and the Deed of Trust. The Promissory note is the loan contract and it includes all of the loan terms and features that you’ll be accepting including the interest rate, payment intervals and prepayment penalties.
By signing this note, you will be agreeing to use your new home as loan security, which gives your lender legal permission to claim the property should you ever default. The Deed of Trust formally pledges your new property as security for the loan. This second document is the security instrument for the loan and is a legally binding way of authorizing your lender to use the property to recoup its losses as necessary, should you prove incapable of adhering to the agreed upon loan terms.
Working with an experienced real estate agent in Irvine will help ensure this process is as seamless as possible. If you’re currently house shopping in Irvine and are interested in learning more, reach out to Irvine Residential Living at (714) 454-6304 and schedule an appointment today.