What triggers a new three-day waiting period for a closing disclosure?

A change in the loan product necessitates a new three-day waiting period for the closing disclosure because it represents a fundamental alteration to the terms of the mortgage agreement. When a loan product is changed, such as switching from a fixed-rate mortgage to an adjustable-rate mortgage or vice versa, it introduces new conditions and risks that the borrower must understand before finalizing the transaction.

This requirement is anchored in the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) regulations designed to ensure that borrowers are fully informed about the terms and implications of their loans. The three-day waiting period allows them the opportunity to review the new terms thoroughly, promoting transparency and helping them make informed decisions.

In contrast, changes to the loan term or a change in interest rate within acceptable tolerance levels do not trigger the same waiting period, as they are not deemed to significantly alter the nature of the loan. A change in credit score generally affects the interest rate or terms but does not directly alter the loan product itself. Therefore, only a change in the loan product requires this specific waiting period to protect the consumer's interests.