Legal Rights for Home Loans

Taking out a home loan is a huge investment and may seem overwhelming, especially for the first time home buyer. There are an intimidating number of pages to read through at closing and it can make one wonder what they have gotten themselves into. Arming yourself with knowledge can help you beat the confusion that builds into overwhelm, for almost every first time home buyer.

In 2003, Congress passed the Contracts and Consumer Finance Act in order to help the consumer understand their legal rights when signing a contract. These were put in place to support the consumer. It helps to know your legal rights for home loans in advance. Here are some of them.

72 hour waiting period

There is a 72 hours waiting period after you have signed the loan papers. What this means is that you have 72 hours in which to change your mind. This is in place so that if the buyer has a change of heart and decides that this is not the house or the loan they want, they have 72 hours in which to change their mind legally.

Information Disclosure Sheet

The lender is required to give you an Information Disclosure Sheet. It should include:

• The actual fees that are involved and what they are for
• Requirements for paying your loan off early, should you choose
• What your monthly payments will be and for how long
• What the interest is, how it is calculated and what happens if you can’t make your payments.
• It should also include your rights if the contract is to be canceled.

While going through the signing process they will tell you whether you can pay the loan off early with or without a fee. The amount of the fee, if there is one, has to be in the contract and that amount cannot be changed while the buyer is with that loan.

If your loan is sold

If your loan is sold to another institution both your current institution and the new one must let you know at least 15 days ahead that it is being sold. They also must provide a statement saying whether anything within the original contract is going to be changed. There must be also be a clear statement in the contract on how much the final monthly payment will be. It may change slightly.

All fees associated with the loan are paid by the borrower. The amount as well as a statement explaining what they are for must be included in your contract. These fees are included in the loan amount.

Get more Information

A buyer may also want to check out the Consumer Guarantees Act and or the Fair Trading Act.

Legal rights for home loans are clear cut. If at all possible the home buyer should try to gain some knowledge about the broad scope of their rights before the closing date. It might help them be aware of a misleading contract as well as ease any feelings of confusion.