New, easier forms help mortgage shoppers

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In the past, one reason many potential homebuyers have found mortgages intimidating is that lenders send them lengthy, complex “disclosure” forms that are confusing and hard to understand. This can make it difficult to figure out exactly what you’re getting into, and whether one mortgage product is really better than another.

However, the federal government is now requiring new, simplified forms to make shopping for a mortgage easier. The new forms make it much less complicated to understand your costs and obligations, and to engage in comparison shopping.

Previously, mortgage applicants received two separate forms after applying for a loan – an early Truth in Lending Statement and a Good Faith Estimate. At closing, they got two more forms – a final Truth in Lending Statement and a HUD-1 Settlement Statement.

These forms were administered by two different federal agencies with different regulations, and they were often confusing and contained overlapping information. Buyers who got the settlement statement at closing sometimes didn’t fully understand it, but were reluctant to ask questions or challenge anything at the last moment with everyone already at the table.

Now, however, buyers who apply for a loan will get a single form, called a Loan Estimate. This form clearly sets out the terms of the loan, and makes it easy to compare the features of one loan with another.

The new forms make it much less complicated to understand your costs and obligations, and to engage in comparison shopping.

The two closing forms have been replaced by a single form called a Closing Disclosure, which provides a clear accounting of the transaction.

The Closing Disclosure must be given to buyers at least three business days before the actual closing. This gives a buyer time to look it over and ask any questions, without feeling rushed or intimidated.

The U.S. Consumer Financial Protection Bureau, which created the new forms, tested them with consumers and found that they improved buyers’ ability to compare different loans by as much as 42 percent.