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Government proposes simplified mortgage disclosure forms

Thursday, December 6th, 2012
Issue 49, Volume 16.
Jason Alderman
Special to the Village News

No doubt many wannabe first-time homebuyers have been sitting on the sidelines of the volatile housing market, unsure when or how to enter the game. If that describes you, you’re probably fortunate to have missed out on the housing bubble and lax lending standards of a few years ago, when millions of people took out mortgages they couldn’t afford – or understand.

Homeownership is a long-term commitment filled with expenses (both expected and unexpected) and responsibilities. The upsides – not to mention the tax advantages – are why approximately two-thirds of Americans own instead of renting. But homeownership is not always right for everyone or at every stage of life.

Here’s hoping that now, as home prices have plummeted and loan interest rates are at historic lows, you can resist the temptation to get in over your head and first bone up on the many one-time and recurring costs involved in owning your own home.

A good place to start is Know Before You Owe, the financial education initiative launched last year by the Consumer Financial Protection Bureau (CFPB) to ensure that people receive concise, easy-to-understand information regarding mortgages, credit cards and student loans, among other major financial decisions (

After soliciting input from thousands of consumers, lenders, mortgage brokers and consumer advocates, the CFPB recently developed new prototypes for the federal disclosure forms borrowers receive after applying for a mortgage and before closing on the loan.

"When making what is likely the biggest Advertisement
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purchase of their life, consumers should be looking at paperwork that clearly lays out the terms of the deal," said CFPB Director Richard Cordray.

The proposed forms combine several different but overlapping documents now required by various federal agencies. But they will simplify the language and format and make it easier to compare different mortgages and more easily understand loan terms, including interest rates, monthly payment amounts, closing costs and how the loan amount might change over time (e.g., with an adjustable-rate loan). They also highlight features borrowers may want to avoid such as prepayment penalties and negative amortization.

In the meantime, if you’re considering buying a home, review the proposed forms to get an idea of which costs you should be watching out for. And, even if you’re already comparing loans or in escrow, ask your lender to show you where the various costs highlighted in the new forms are located in your current disclosure documents – it might help avoid costly last-minute surprises.

Here are some factors future homebuyers should keep in mind:

Start planning now. It could take years to save enough for a down payment and closing costs.

Don’t forget ongoing expenses like a monthly mortgage payment, mortgage insurance, homeowner’s insurance, property taxes, furnishings, maintenance and repairs.

People with poor credit ratings usually either don’t qualify for loans or pay much higher interest rates. Work on repairing your credit at the same time you launch a savings plan.

Jason Alderman directs Visa’s financial education programs. 



Comment Profile ImageAuth
Comment #1 | Saturday, Feb 2, 2013 at 2:24 am
For some people 20% is a lot to put down. There are many insatnces where the parents could help out. They can sign onto the mortgage as a guarantor. After one year they can be removed from the mortgage through a lawyer. Lenders want to see that you are good with credit prove your responsible and lenders will have no problem with you in the future. There are many times a guarantor is needed for younger professionals without any credit history. Speak to a mortgage broker they can help you. The slow way is to get a credit card from your bank and start using it. Make sure your payments are on time and in 3-6 months you will start seeing your score. Typically, you need 1 or 2 open lines of trade (credit card, line of credit, personal loan) to get a higher score. Make sure you make your credit card payments right away and try not to carry any balances over to the next month. Keep your statement balance at $0 while using your card regularly

Article Comments are contributed by our readers, and do not necessarily reflect the views of The Fallbrook Village News staff. The name listed as the author for comments cannot be verified; Comment authors are not guaranteed to be who they claim they are.


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