According to TRID, the federal law that regulates the mortgage process, the lender is required to provide borrowers a Closing Disclosure at least three business days prior to the close of your mortgage. For example, if you receive the Closing Disclosure on a Tuesday, the earliest your mortgage can close is the following Friday. The Closing Disclosure outlines the final, actual terms of your mortgage, including your interest rate, APR, closing costs, monthly payment and loan features.
You can request to have the three day waiting period waived in the case of a personal financial emergency but you must meet specific requirements for the lender to grant you a waiver. Before we explain how that process works, it is important to understand more about Closing Disclosure document.
The purpose of the Closing Disclosure is for you to compare your actual mortgage terms to the terms the lender outlined at the beginning of the mortgage process in the Loan Estimate (the lender is required to provide you a Loan Estimate within three days of submitting your loan application).
Review What is a Closing Disclosure?
In short, the Closing Disclosure is designed to help you identify and avoid a “bait and switch” when the lender promises you one set of terms to get your mortgage business but then delivers worse terms, such as a higher mortgage rate, when you are under pressure to close your loan and you have few options.
The Closing Disclosure includes a table that compares your final closing costs and other items to the figures included in the Loan Estimate. Federal law limits how much certain closing costs can change from the time you submit your mortgage application (as disclosed on the Loan Estimate) until closing. If there are significant changes or discrepancies, such as an increase in your mortgage rate or closing costs, you can ask the lender to address and correct the issue.
Review How to Compare a Closing Disclosure to a Loan Estimate
If the lender cannot explain or resolve the issue, you can cancel, or rescind, your mortgage any time before you sign your final loan documents. Cancelling your mortgage can cost you time and possibly money in the near term but is far better than getting a bad mortgage that costs you significantly more in the long run.
Why Am I Required to Wait Three Days After I Receive the Closing Disclosure?
The purpose of the three day waiting period after you receive the Closing Disclosure is to provide sufficient time for you to review the document and to identify and address any issues you find. Rather than feeling rushed to close your mortgage and potentially missing costly mistakes in your loan terms, the three day waiting period provides a buffer that slows the process down. When used correctly, the waiting period enables you to make sure you are getting the mortgage you thought you were and the loan the lender promised you from the beginning.
The mortgage process can be complicated and overwhelming so we recommend that you use the three day wait period to carefully examine the Closing Disclosure and other loan documents to make sure there are no errors. A mistake in your closing costs can cost you thousands of dollars while a higher interest rate increases your monthly payment for your entire mortgage.
It is also important to make sure that you understand how your mortgage works including how your payment is calculated and if it can increase over the course of your loan. The only things that are worse than a rushed closing are paying too much for your mortgage or getting a loan you do not understand so use the waiting period to avoid these outcomes.
We should also highlight that your mortgage terms cannot change during the three day waiting period. For example, your mortgage rate and closing costs cannot increase even if interest rates rise from the time you receive the Closing Disclosure until when you sign your final loan documents at the closing table. This means that the waiting period cannot be used by the lender as a stall tactic. In fact, the lender is usually just as eager as you are to close your mortgage.
When Can You Waive the Three Day Waiting Period After You Receive the Closing Disclosure?
TRID is very precise about the criteria you must meet for the lender to grant a waiver to the three day waiting period. Given the importance of the Closing Disclosure document, it is not supposed to be easy to waive the waiting period. Below are the three requirements you must follow for a waiver:
You have a personal financial emergency the requires your mortgage to close before the three day waiting period ends. An example of a personal emergency is if you are going to lose your home if the mortgage does not close within three days.
You have received the Closing Disclosure document. Your mortgage cannot close until you receive the Closing Disclosure.
You provide the lender a signed, written letter that explains the personal financial emergency and states that you waive all or part of the three day waiting period. Please note that the lender cannot provide a waiver form for you to fill-out and sign.
If you fulfill the requirements above the lender should grant you a waiver but you may need to convince the lender to cooperate with you as waiving the waiting period may expose the lender to legal risk if something goes wrong with your mortgage. If you do not meet the guidelines above, our recommendation is that you use the three day waiting period to review your loan documents to make sure that you get the mortgage that is right for you.
“Closing Disclosure Explainer.” CFPB. Consumer Financial Protection Bureau, 2017. Web.
“TILA-RESPA Integrated Disclosure Rule.” Small Entity Compliance Guide. Consumer Financial Protection Bureau, October 2016. Web.