The required waiting period before a borrower can close on a mortgage loan following the issuance of loan application disclosures is three business days. This three-day period is mandated by the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA), which aim to ensure that borrowers have adequate time to review and understand the costs associated with their mortgage loan. This waiting period allows borrowers to evaluate their options carefully, compare different loan products, and confirm their decision before proceeding to close the loan.
The three-day waiting period is applicable after the borrower receives the loan estimate, which outlines the terms of the loan, estimated monthly payments, and closing costs. This regulation helps to promote transparency and protect consumers by giving them a necessary buffer to consider their financial commitment before finalizing the loan.
While options like one, two, or five business days may seem plausible, they do not align with the established regulatory framework. The single business day does not provide sufficient time for thorough review, while five business days exceeds the required period set forth in the legislation. Thus, three business days is the ideal duration that successfully balances adequate contemplation and the progress of the loan process.