Specialized Buyers Agent Answers Real Estate Questions
Q. I am supposed to buy a new home at the end of next month. Both the seller and I would like to move up the closing date to the beginning of the month since all the paperwork is ready and the seller wants to get the proceeds. My lender says if I do that, the APR will change more than the allowable amount and we have to wait 11 days so we can’t close until mid month. What is that all about? H. Prater, Paoli, PA
A. You are suffering from the results of the new federal lending disclosure laws. These should make things better for some consumers, but until the folks who perform the closings get a handle on all the new rules, they have made it a bit of a mess. Because the rules are intended to protect against last minute changes in fees, anything that changes the magic APR number (which is not the actual interest rate but a rate calculated to include most fees), means you have to wait the required delay period under the new law. Unfortunately, changing the date of the closing changes the amount of prepaid interest that is due and so can trigger this wait. If you close on the first day of the December, for example, you pay 31 days of prepaid interest (but have no principal and interest payment until February 1). But if you close on the last day of the month, you will pay only 1 day of interest. That is a huge difference in actual cash outlay at the table. The law is supposed to help you avoid last minute fees and interest rate changes, not a change in timing, but it catches you under both scenarios.