After the housing crisis, the government worked hard to make sure borrowers were more informed about a potential mortgage. A part of the new guidelines is the TILA-RESPA Integrated Disclosure Rule, otherwise known as TRID. It has been in effect since 2015, and helps borrowers feel empowered when taking out a mortgage.
Keep reading to learn how TRID affects you.
The Know Before you Owe Rule
Before you take on a mortgage, you should know what you owe. That’s exactly what TRID helps make possible. It’s applicable for any loan you take out for residential property, whether you build a new home or buy an existing home – even if you buy land.
TRID dictates the information/disclosures lenders must provide you when you apply for a mortgage. Having proper disclosures in your hands helps you understand what you will owe over the lifetime of the loan. Rather than focusing on whether or not you can afford the monthly payment, the focus is on the big picture. What’s the loan going to cost you over its lifetime?
The TRID Documents
You’ll receive two main documents as a part of the TRID guidelines, the Loan Estimate and Closing Disclosure.
The Loan Estimate used to be the Good Faith Estimate. Whether you apply with one lender or ten, you’ll receive the same standardized document from each lender. You must receive the documents within three business days of applying for the loan. The document shows you the terms and fees of the loan. It helps make comparison shopping for a mortgage easier.
The Closing Disclosure replaces the HUD-1 Statement. This document is easier to read than the HUD-1. You can clearly see the costs to close the loan. The disclosure also shows the difference between the costs reported on the Loan Estimate to what you’ll actually pay. This gives you a chance to ask the lender questions and know what you are paying for the loan. Finally, you can also see the estimated amount of money you’ll need to bring to the closing. Both documents are straightforward and easy to read.
The Timeline to Receive Documents
TRID dictates when you are supposed to receive the documents for your mortgage loan. The Loan Estimate must be sent to you within three business days of applying for the loan. You officially apply for the loan when you provide your name, address, social security number, loan amount desired, and property address. This document helps you determine if you can afford the loan’s payment (it includes principal, interest, real estate taxes, homeowner’s insurance, and mortgage insurance). It also helps you see the cost of the loan as estimated at this point. You can then use it to compare the offers from other lenders.
TRID requires that you receive the Closing Disclosure at least three business days before the closing. If anything changes to the loan or the costs involved with the loan during that time, you must receive a new disclosure. This could delay the closing process, but TRID requires it in order for lenders to stay in compliance and borrowers to stay informed.
TRID is in place to protect you – the borrower. While it might seem like a nuisance, especially if you don’t receive your documents on time, it’s there to protect you. Use the disclosures to your advantage and see what a loan truly costs. This way you can make the most of the offers provided to you, choosing the loan that makes the most sense for your financial situation.