Your Rights as a Buyer
As a first-time homebuyer it is good to know at least a little bit about some of your rights during the homebuying process. Doing so will help you better understand the many different disclosures you will be provided, why they are being provided, and serve to inform you about your options if you feel your rights have been violated. While this is a very complicated and lengthy subject and FirstHomeAdvisor.com does not provide legal advice, the following are overviews of the some of the related laws that first-time homebuyers should know a bit about. If you feel your rights have been violated, you should contact the applicable regulatory agency or an attorney who specializes in the related type of law.
Fair Credit Reporting Act
The Fair Credit Reporting Act (FCRA) covers how a consumer's credit information is managed by the credit bureaus and it provides consumers rights to dispute and resolve any inaccurate information showing on their credit reports. The Federal Trade Commission (FTC) enforces FCRA. FCRA also ensures that consumers may obtain a free copy of their credit report from each of the three credit bureaus every 12 months which are available throughwww.annualcreditreport.com. For more information about the Fair Credit Reporting Act visit www.ftc.gov/credit.
Fair Housing Law
As it relates to buying your first home, the Fair Housing Law essentially ensures that first-time homebuyers regardless of their race, color, national origin, religion, familial status, sex, or handicap status recieve equal opportunity, treatment and consideration for home loans and housing services. Among other things, the law makes it illegal for a provider of housing services or a loan orginator to discriminate against applicants who are members of one of the "protected classes" listed above when they request or are provided any type of housing services. The U.S. Department of Housing and Urban Development (HUD) enforces the Fair Housing Act and is the agency to contact if you feel your Fair Housing Act rights have been violated. To learn more about Fair Housing Law visitwww.hud.gov/fairhousing.
Homeowner Protection Act of 1998
The Homeowner Protection Act of 1998 protects homeowners who obtain a conventional loan from unnecessarily paying Private Mortgage Insurance (PMI). The act requires lenders to automatically cancel PMI payments for homeowners, who are in good standing, once they have 22% equity in their homes. The law also allows homeowners, who are in good standing with their lender, to request the cancellation of their PMI payment once they have 20% equity in their home. It is important to note that lenders are provided flexibilty in calculating a homeowner's equity, so you will need to check with your lender about this calculation if you are getting a conventional loan. To learn more about the Homeowner Protection Act visit frbs.org .
Real Estate and Settlement Procedures Act (RESPA)
The Real Estate and Settlement Procedures Act is known as (RESPA). RESPA is enforced by the U.S. Department of Housing and Urban Development (HUD) and it covers specifics of how a loan originator must disclose the terms and the costs of getting a home loan. More specifically, RESPA requires the loan originator to provide loan applicants a Good Faith Estimate (GFE) that is intended to help the buyer understand the type and fees being charged for the type of loan they are being offered. The law also governs how a closing agent must disclose and record the loan fees and costs of the loan being offered by the lender. This infomation is provided to the loan applicant in what is called a HUD-1 Settlement Statement. To learn more about RESPA visit www.hud.gov/respa.
The S.A.F.E. Act is short for Secure and Fair Enforcement for Mortgage Licensing Act of 2008. This federal law provides consumers a way to check the licensing status of any individual loan orginator or mortgage company who is required to have a state license. The law created the Nationwide Mortgage Licensing System (NMLS)where a consumer can check to see that an individual loan originator and their company meets their state's licensing requirements. You should know though that loan officers employed by nationally chartered banks or from states that do not require mortgage licensing are not included in the NMLS registry. To learn more about the S.A.F.E. Act visit www.ffiec.gov/safeact.htm.
Truth In Lending (TIL)
The Truth In Lending Act (TILA) is a law that regulates how lenders must advertise and disclose the interest rates and terms they offer their borrowers. One of the big requirements of the law it that it requires the lender to disclose the true cost of the loan by factoring in the fees they charge to make the loan which is expressed as an Annual Percentage Rate (APR). Using the APR to compare similar loans is a good way for first-time homebuyers to compare various loan offers. The law also requires lenders to provide consumers a Truth In Lending (TIL) Statement shortly after they apply for a home loan.
The TIL shows important details about the borrower's proposed loan.