What Are Disclosures?
Loan disclosures are a packet of papers that provide you with important information. Included is your three-page Good Faith Estimate (updated), Truth-in-Lending form, Rate Lock Confirmation that tells you what interest rate you’re locked in at or if you are not locked and still floating your rate, your credit scores, whether or not the lender sells your loan after closing, and other pertinent information. The purpose of the disclosures is to inform you about your financing. They are not a contract.
When Should You Receive Your Loan Disclosures?
You should receive your loan disclosures within three business days of giving your signed Purchase & Sale Agreement to your loan officer. As soon as you and a seller have a mutually signed contract, it is time to go full steam ahead with your loan processing. Your loan officer now has the address, closing date, and exact purchase price. This is the time for your disclosures to be prepared, and federal law states a lender must do so within 3 business days (whether or not your interest rate is locked.
You do not receive disclosures before you have a fully executed Purchase & Sale Agreement. There would be no point, because you don’t have an exact price or even a property before that time. What you ask for upfront is a Cost Estimate (the new name for the upfront Good Faith Estimate, due to the badly written Dodd-Frank law).
Signing Your Disclosures
Immediately upon receiving your paperwork, read through it and ask your loan officer about anything you don’t understand. It is your right and responsibility to understand your financing, and it is your loan officer’s job to explain it to you. Good loan officers love explaining loans, so don’t be reticent about asking. Then sign the paperwork and return to your loan officer asap–within a couple days. Don’t ignore them! Don’t leave them gathering dust for a week, because doing so could delay your loan processing and cause you to miss your closing date.
Loan disclosures are most often sent by email now. You print them out, sign and date, and return. If you cannot receive them by email and print them for signing, let your loan officer know so that he/she can mail them to you.
If–God forbid–your lender tries to sneak in additional lender fees that are above what was on your upfront Cost Estimate, do not sign any of the disclosures until this is corrected. Also, make sure the third party costs that are controlled by the lender are the same: appraisal fee, credit report fee, tax servicing fee, and flood certification. Just last week, one of my coaching clients noticed her disclosures had all fees increased from the initial cost estimate. This would have cost her an additional $350 had she not been aware. No bait-and-switch allowed!
When my client called the loan officer on it, he apologized and scurried to get her corrected disclosures. If he had not, she was prepared to walk away and go to a more ethical lender. If she had signed and returned the paperwork, she would have ended up paying more, because signing is acceptance of the terms. Once you sign, it is too late to negotiate.
Whatever you do, don’t neglect this important step in getting your mortgage–and don’t let your lender go weeks without providing you with this vital information: your loan disclosures.