There’s a rule in mortgage lending that affects the timing of your home loan process, and if you’re not familiar with it, you could be caught off guard. It’s called the 3 7 3 rule in a mortgage, and it sets specific deadlines for when lenders must provide disclosures and when you can officially close on your loan.
At Penn Street Mortgage, we’re all about keeping things straightforward. The 3 7 3 rule isn’t complicated, but it does have an impact on when you get to the closing table. Here’s what it means for you.
Breaking Down the 3 7 3 Rule
This rule comes from the Mortgage Disclosure Improvement Act (MDIA), which is part of the Truth in Lending Act (TILA). It lays out three key timing requirements:
- 3 days: Lenders must send you the initial loan disclosure within three business days of receiving your mortgage application.
- 7 days: A mandatory waiting period begins after the initial disclosure. Your loan cannot close until at least seven business days have passed.
- 3 days: If your loan’s annual percentage rate (APR) changes beyond a set limit, the lender must issue a new disclosure, triggering an additional three-day waiting period before closing.
These timeframes allow you to review your loan terms before signing anything.
The First 3 Days: The Initial Loan Disclosure
As soon as you apply for a mortgage, the lender must provide a Truth in Lending (TILA) disclosure within three business days. This document outlines the key terms of your loan: APR, estimated monthly payment, total loan amount, and any other important costs.
Here’s what to expect:
- If the lender delivers the disclosure electronically, you can review it right away.
- If it’s mailed, it’s considered received three business days after being sent.
- Nothing moves forward until this document is in your hands.
Your loan process won’t progress until the lender confirms you’ve received the disclosure.
The 7-Day Waiting Period Before Closing
Once you get your initial disclosure, the clock starts on the seven-day waiting period. This means you can’t close on your loan for at least a week, even if everything else is ready.
This waiting period exists for one reason: to give you time to review your loan terms and ask questions. It prevents lenders from rushing borrowers into a deal they don’t fully understand.
If you’re in a competitive market, factoring in this waiting period when planning your timeline is important.
The Final 3 Days: APR Changes and Disclosure Updates
Lenders are required to give you an updated loan disclosure if your APR changes by more than 0.125% for fixed-rate loans or 0.25% for adjustable-rate loans. If that happens, a new three-day waiting period begins before you can close. This applies if:
- Your interest rate increases beyond the set limits.
- A major fee is added or removed.
- The structure of your loan changes in a significant way.
If the lender makes changes within three days of closing, they must send a revised disclosure, and you’ll have another three days to review before the loan can be finalized.
How the 3 7 3 Rule Affects Your Loan Timeline
What is the 3 7 3 rule in a mortgage all about? Timing. It sets built-in waiting periods that can affect how quickly you close on your home. Here’s how it can impact your loan:
- Your closing date is locked into these timeframes: If you were hoping for a quick turnaround, these required waiting periods could add time to your schedule.
- Any last-minute changes can reset the clock: If your APR changes too much, you’ll need to wait three more days before closing.
- Your lender’s delivery method matters: If disclosures are sent electronically, you can review them immediately. If they’re mailed, extra days are added to your timeline.
Planning ahead can help you avoid delays.
What Is the 3 7 3 Rule in a Mortgage? Why It Exists
So, what is the 3 7 3 rule, exactly? Quite simply, it was put in place to protect borrowers from surprise fees or last-minute changes. Giving you time to review your loan terms ensures that you understand what you’re agreeing to before you sign.
At Penn Street Mortgage, we believe in full transparency. These waiting periods help keep the process fair for borrowers, and we’re here to make sure you have all the information you need.
What Borrowers Should Keep in Mind
If you’re preparing to close on a mortgage, here’s what you need to do:
- Keep an eye on disclosure timelines: Your lender must follow these deadlines, so make sure you know when to expect each document.
- Ask questions early: If anything in your loan disclosure looks off, don’t wait until the last minute to ask about it.
- Be prepared for possible delays: A new three-day waiting period will be required before closing if your APR changes significantly.
Understanding these steps can help you plan ahead and avoid unnecessary stress.
Choosing the Right Mortgage Lender
The 3 7 3 rule in a mortgage applies across the board, but how smoothly it plays out depends on your lender. Some handle the process efficiently, while others can slow things down.
That’s why it’s important to work with a mortgage lender who prioritizes clear communication and keeps things moving. Not sure where to start? Our guide on selecting a mortgage lender breaks down what to look for.
If you’re comparing options, shopping for a mortgage lender helps you understand how different lenders approach the process. It’s also a good idea to make sure you’re asking the right questions before you commit.
Contact Penn Street Today
We’ve effectively answered the question everyone has on their minds—what is the 3 7 3 rule in a mortgage? It might seem like an extra step, but it’s there for a reason. These waiting periods ensure that you have time to review your loan terms and make informed decisions before closing.
At Penn Street Mortgage, we’re committed to making the mortgage process as smooth as possible. Whether you’re purchasing a home or refinancing an existing loan, we’ll walk you through each step so there are no surprises. If you have questions about your mortgage timeline, reach out to us today. there are no surprises. If you have questions about your mortgage timeline, reach out to us today.