Purchasing a home is an exciting experience that can also be overwhelming with lots of paperwork, decisions to make, financial data to gather, and a whole new vocabulary to decipher. As with most things, the process and the terminology are constantly evolving to keep up with the changing times. New regulations have resulted in new details to understand about the dynamic process of finding a home and securing financing. To keep you up to date, we’ve updated our previous blog about mortgage jargon to reflect new terminology and forms that have emerged, or gone away, with regulations that took effect on October 3, 2015.
What is TRID?
TRID is an acronym for TILA- RESPA Integrated Disclosure, which is also known as the “Know Before You Owe” rule. The new rules went into effect on October 3, 2015 and are aimed at improving consumer understanding of the mortgage process. The changes include the consolidation of some standard forms into two new documents. The new forms work in combination with each other and are designed to be easier to understand.
New TRID guidelines also include some time restrictions that require everyone involved to diligently provide complete and accurate information in a timely manner to avoid closing delays. These restrictions require a lender to have more information from the home buyer at the time of loan application than in the past. It also requires quicker responses throughout the mortgage process from all parties including REALTORS, title service providers, and escrow agents.
What forms have gone away?
The HUD-1 settlement statement, Good Faith Estimate form, and the Truth in Lending Act disclosure have all gone away as of October 3, 2015. In their place are the new Closing Disclosure and a new Loan Estimate.
Loan Estimate (LE)
The Loan Estimate (LE) provides a summary of key loan terms and an estimate of loan closing costs. This form is delivered to the borrower no later than the 3rd business day after the application is received by the lender. To learn more about the Loan Estimate, the CFPB has provided an online tool to help you review the form so that you can ask questions about anything that doesn’t match your expectations.
Closing Disclosure (CD)
The Closing Disclosure (CD) is a 5-page document that provides final details about the mortgage loan you have selected. It includes the loan terms, your projected monthly payments, and the amount of fees and other costs you will be required to pay in order to close the loan. It must be provided to the borrower at least 3 business days before the loan closing. The CFPB has provided an online tool to help you understand the details of the financial terms you are agreeing to.
Beyond the basics
Now more than ever, consistent communication throughout the process is absolutely critical. RPM is committed to education, training, and the development of resources to ensure successful implementation of the new TRID rule, while limiting the possibility of closing delays.
Now that you’ve explored the basics, you may have questions about how all of this applies to your borrowing scenario. We’re here to help. Contact a loan advisor near you for additional guidance and take another step toward achieving your home ownership goals!