A mortgage rate lock guarantees the interest rate for a period of time, protecting you in case rates go up. The governments’ new mortgage disclosure rules, however, could make closings take longer.
The new rules, which go into effect October 3rd, are designed to make it easier for homebuyers to understand mortgage documents, but they also require lenders to have all the paperwork and information from different parties before moving ahead with closings. With the new three-day waiting rule (you now get three days to review documents instead of 24 hours), any last-minute changes will also extend the closing date.
As a result, closings this fall could take up to 60 days — even for mortgage lenders that have long sought to do quick turnarounds and get people into their new homes in about a month.
“It’s going to be pretty disruptive,” said Richard Vetstein, a real estate attorney. “It has a potential to make it a very messy fall market for sure.”
For buyers and sellers, the changes mean they will have to gather documents, such as IRS filings going back two to three years to verify their income, and get them to mortgage companies sooner.
If your rate lock isn’t long enough to cover the closing period, Draper Consulting Service recommends being prepared to seek an extension for your interest rate lock.