It's not as easy to buy or sell a house today as it was three years ago.  New rules and regulations, much needed, are popping up all over.  If you are buying or selling a home RIGHT NOW, you need to know about the new Truth in Lending law, aka Mortgage Disclosure Improvement Act.

What is Truth in Lending?  That is the paperwork with outlined estimated costs to the buyer for purchasing the home.  All closing costs are displayed, including tax prorations, insurance, escrows, APR, etc.   The Mortgage Disclosure Improvement Act (effective July 30, 2009) now requires a specific timetable for the buyer to review the charges. This Truth in Lending paperwork will come from your lender.

Once the buyer has a signed contract for a property, the lender must supply this TIL document.  This is for the protection of the buyer--so the buyer can review the charges associated with the purchase of the home well before closing. Note these deadlines:

• No loan may be closed prior to seven business days after the buyer receives the initial TIL statement. 
• If the loan terms change between the time of the signed contract and closing (due to inspections and/or renegotiations, change of closing date, etc), and these changes cause the APR to increase or decrease more than .125%, a NEW TIL statement must be prepared for the buyer's review. 
• The buyer must have this updated TIL statement for review at least three business days before closing.

Let's look at a couple of examples. If you have a contract to purchase a home for $150,000, your lender will send you an initial TIL statement based on that price and other terms of the contract.  After inspections, you and the seller agree to drop the price of the home to $140,000.  That's approximately a 7% price drop.  Therefore, your lender needs to write up a new TIL statement reflecting the charges that go along with the new agreed upon price.  And you have to have that statement for at least three days prior to closing.  Or, let's say the price doesn't change but as a buyer, you decide to close 3 weeks earlier than initially planned.  That is going to affect the interest paid, taxes paid, and other closing costs by more than .125%--so a new statement must be issued reflecting the updated numbers.

How does this affect the seller?  The seller better be sure that the buyer's lender is following these new rules correctly or there could be delays in closing.  And nothing is worse than last minute delays in closing--for either party.

Talk over these new rules with your listing agent and/or buyer's agent.  Your agent should be keeping up with these new regulations and keeping you informed at every step that they are being followed!

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