Changes to HUD - what it means for closings

Currently, the HUD-1 Settlement Statement can be presented to the buyer on the day of closing and any changes to the statement can take place during the loan closing.  Gone are the days of making last minute changes to loans.

The new TILA-RESPA Integrated Disclosure (TRID) rule establishes new forms, which are replacing the standard disclosure forms known as the Good Faith Estimate, Truth in Lending and HUD-1.

These two forms will be joined by a new three day waiting period to close, whereby all contracts and forms must be filled out and correct three days before the close date. Should an amendment or change need to be made, a new three day period kicks in further pushing back the close date.

With these new documents and rules coming soon, we at least have two months to get use to the new system and adjust our current way of thinking for closing.  

Common Documents Required For A Mortgage Pre-Approval for Home Buyers

Even though many lenders are still quoting quick 10 minute pre-qualifications over the phone or online, a true mortgage approval that holds any weight is one that has been issued by an underwriter who has had an opportunity to review all of the necessary documents.

With a constant stream of new lending guidelines, volatile mortgage rates and tightening regulation from Washington, very few real estate agents will show new homes to a First-Time Home Buyer without at least a pre-qualification letter.

A Pre-Approval Letter will help you in three ways:

• It lets you know how much mortgage you can qualify for
• It gives you an estimate of what your total housing payment would be
• Submitting a strong “Pre-Approval” letter with a purchase offer will give the seller more confidence about your ability to complete your end of the agreement

It’s obviously a good idea to get your paperwork prepared ahead of time so that the pre-approval process is as thorough as possible.

In order to get a pre-approval letter, you’ll start by filling out a loan application and submitting a few documents for the loan officer and / or underwriter to review.

Common Loan Pre-Approval Documents:

Income / Assets for Wage Earner:

• Last 2 year W2s and Tax Returns
• 2 most recent Pay Stubs
• 2 most recent Bank Statements, 401(K), Liquid Assets, Investment Accounts

Income / Assets for Self-Employed:

• Last 2 year Tax Returns – Business and Personal
• Last Quarter P&L Statement

Letter of Explanation For:

• Employment Gap or New Line of Work
• Late Payments / Judgments / Bankruptcy on Credit Report

Other:

• Bankruptcy Discharge
• Child Support Documentation
• Lease Agreements (If own other Rental Properties)
• Mortgage Payment Coupons (If own other Real Estate)

…..

Most borrowers also want an opportunity to learn more about the loan officer before digging up all of these personal documents. Spend 15 minutes on the phone asking the loan officer to explain how mortgage rates work, quizzing them on some basic industry vocab or just to see if they know what to prepare your agent for ahead of time. The Q&A session can be more than just a lender qualifying you, as long as you’re prepared to ask the right questions.

Either way, you’ll definitely want to have the above list of approval documents ready once you’ve decided on the right loan officer that you trust will meet your expectations.

David Sharp

NMLS#280482

123 Mortgage Team

314-260-4360