New laws have been introduced in an attempt to avoid surprises for borrowers at the closing table in both purchase and refinance transactions
The laws require initial disclosure of fees, and re-disclosure in the event of fee or rate changes.
Traditionally, when a borrower has made application to a lender, the lender, by law, was and is required to disclose certain information.
This information includes two documents.
The first document is called the good faith estimate (GFE).
This shows the rate, the fees and the charges the lender expects to collect in the course of the transaction.
The second document is called the truth in lending (TIL) disclosure. This shows what is called the annual percentage rate (APR).
The APR is a calculation that rolls fees and costs of the loan into the loan itself.
The APR is normally higher than the rate.
So now, if you go to two lenders with the same rate and same loan amount, the APR given by each one will
be determined by the cost associated with the loan.
You can now compare apples to apples.
Now, before lenders can charge you any fees, other than for obtaining your credit report, they must receive from you, in writing, a statement that you acknowledge what they are proposing to you in the way of fees and APR.
If there ends up being a change in the loan amount, or a rate or fee change that results in an APR change of greater than one-eighth of a percent (.125), the lender must re-disclose this.
Under the new laws, borrowers also now have a minimum of three business days to review and approve the changes before the file can go to closing.