What type of loan transaction requires the disclosure of the Settlement Cost Booklet?

The Settlement Cost Booklet is a document that must be provided to borrowers involved in certain loan transactions, specifically those related to purchasing a new home. This requirement stems from the Real Estate Settlement Procedures Act (RESPA), which mandates that lenders provide a borrower with the booklet at the time of application or within three business days when it comes to a purchase transaction.

The purpose of the booklet is to ensure that borrowers are informed about the settlement process, associated costs, and their rights throughout that process. It is particularly vital for new home purchases, as buyers typically encounter several different fees and costs that they may not fully understand without this guidance.

Other types of transactions, such as reverse mortgages, refinance transactions, or subordinate financing, do not have the same disclosure requirement for the Settlement Cost Booklet specifically outlined in RESPA. This distinction makes the requirement applicable primarily to new home purchases.