It doesn’t matter whether it’s your first or fifth time buying a home: The mortgage process is always complicated. Luckily, the U.S. government wants you to be informed. Enter “Know Before You Owe.”
What is Know Before You Owe?
An initiative designed to make the process of getting a mortgage simpler and more transparent, Know Before You Owe was created with the goal of helping borrowers make better home-buying decisions. Implemented by the Consumer Financial Protection Bureau (CFPB), Know Before You Owe replaced the Good Faith Estimate in 2015. Where there were previously four mortgage disclosure forms, there are now just two — the Loan Estimate and Closing Disclosure forms. The new forms are both easier to use and understand.
How do the new mortgage preapproval forms work?
When you apply for a loan, you’ll get a Loan Estimate form to help you understand all the available loan options. CFPB advisers suggest that, as a borrower, you should apply for loans from at least three different providers before selecting one. Once you’ve shopped around and selected a mortgage, you’ll receive a Closing Disclosure form. By comparing the Closing Disclosure with the Loan Estimate, you can make sure that the offer you received is correct and avoid any costly surprises at the closing table. Know Before You Owe mandates that borrowers get three full business days to review the Closing Disclosure before actually sitting down at the closing table.