Do you know what it takes to own a home? Many American consumers have questions, so the Consumer Financial Protection Bureau (CFPB) is releasing a tool that could make it easier for you to navigate the mortgage process.
The "Know Before You Owe" program will provide an interactive, step-by-step overview to help buyers know what they can afford and provide assistance in filling out all the necessary forms. Creditors will have to begin providing the new forms on Oct. 3, 2015, making it easier for consumers to understand mortgage options and comparison shop between multiple home mortgage loan offers.
"Our new mortgage forms reduce the information gap between lenders and consumers, shedding light on a process that often feels like a mystery," CFPB Director Richard Cordray said in a written statement. "It is time consumers have more power in the mortgage process, and our new forms and online tools will help make that a reality."
In November 2013, the CFPB finalized its Loan Estimate and Closing Disclosure, a document designed to help consumers better understand their options and help them choose the right deal for them. The Loan Estimate details the transaction, including the estimated home mortgage loan and closing costs. Consumers can use this form to do apples-to-apples comparison shopping between loans. The Closing Disclosure, which details the final transaction, is provided to consumers at least three business days before closing. This time period allows consumers to confirm whether they are getting what they expected, ask questions, and negotiate over any changes. This use of this form will be required by all licensed realtors.
In January, the CFPB released "Owning a Home", an online suite of tools written in plain language to help consumers navigate the mortgage process and make decisions. Today, several new tools are being released to benefit the consumer:
- Guide to the mortgage milestones: The new "Owning a Home" site is organized into different phases of the mortgage process. Each phase contains practical actions consumers can take, helpful information to keep in mind, and tips on how to avoid pitfalls. Also in each phase are interactive tools and resources to help consumers with key decisions.
- Monthly mortgage payment worksheet: The tools include a monthly payment worksheet that helps homebuyers figure out how much they can spend on a mortgage. It asks potential buyers to consider their current debts, savings, living expenses, and projected costs if they bought a home.
- Interactive sample of the new Know Before You Owe mortgage forms: "Owning a Home" features an interactive sample of the Loan Estimate and the Closing Disclosure. These can help consumers double-check the details of their own transactions and get definitions for terms they may not understand. The interactive samples provide descriptions and highlight key areas for consumers to pay attention to. For example, for the Loan Estimate, the tool helps consumers check if their rate is locked, if the loan amount is the expected loan amount, if the interest rate is fixed or adjustable, or if there a prepayment penalty. And "Owning a Home" shows consumers where to look, page-by-page, to check that terms and numbers on both the Loan Estimate and Closing Disclosure match.
"Owning a Home" can be found here.