What Kinds Of Loans Do TRID Disclosures Cover?

 

Do the TRID rules apply to your Fort Myers or Cape Coral area real estate?

TRID rules apply to MOST consumer credit transactions secured by real property. These include mortgages, refinancing, construction-only loans closed-end home-equity loans, and loans secured by vacant land or by 25 or more acres.

The rule does NOT apply to Home Equity Line of Credit transactions reverse mortgages mortgages secured by a mobile home or other dwelling that is not attached to real property.

Also, TRID rules do NOT apply to loans made by a person or business that makes 5 or fewer mortgages in a calendar year.

More questions about TRID? Call Title Junction – The Premier Title Insurance Provider Serving Cape Coral, Fort Myers And The State Of Florida. Call 239.415.6574.

In case you missed it, check out our last Title Junction post to help understand what Equity means.

When Do I Get My Loan Closing Disclosure?

 

If an eligible loan proceeds from Estimate to closing, creditors must provide a Closing Disclosure form documenting the actual transaction terms and costs THREE business days before consummation. It must be in writing, whether paper or digital, and disclose ONLY the information specified by the CFPB.

If terms or costs change prior to consummation the creditor must provide a corrected disclosure containing the updated terms. In some cases, this may require an additional 3-business-day waiting period to consummation.

Consummation and Closing are legally distinct although they may occur at the same time depending on applicable State laws. Consummation occurs when you become contractually obligated to the CREDITOR on the loan not, for example, the real estate seller. The Disclosure must be delivered three business days prior to the legal Consummation date.

Understanding Your Loan: Closing Disclosure Page 1

 

The first page of your Closing Disclosure documents:

  • The Loan Amount – the total you will actually borrow
  • The Interest Rate – which does NOT include the fees factored into the APR on Page 5

If this loan has a penalty for pre-payment or includes a balloon payment Page 1 will summarize the terms.

Projected Payments will show the chief cost components – Principal & Interest, Mortgage Insurance and estimates of your Escrow Payments over the life of the loan. You may see different columns for different periods if changes in terms such as mortgage insurance change payment totals.

Closing Costs summarizes your loan closing expenses, and Cash To Close adds the additional amounts due to give you the cash balance you will need in 3 business days.

Understanding Your Loan: Additional Information Can Be Important

 

Page 4 of your Closing Disclosure is important. It is NOT just standardized form information that is identical for every loan.

Review these terms:

  • Assumption: can this loan be transferred to another person if you sell or transfer the property?
  • Demand: can the lender require early repayment of the loan?
  • Late Payments: what penalty, after what period, applies?
  • Negative Amortization: does this loan schedule or allow payments that do NOT fully cover the interest due, resulting in increased loan principal?
  • Partial Payments: what is THIS lender’s policy?

You should also review Escrow Account details to understand whether you will pay additional property costs via regular Escrow Account payments or handle them yourself directly.

Understanding Your Loan: Cash And Transaction Summaries

 

Page 3 of your Closing Disclosure will compare cash requirements from your Loan Estimate to your actual final charges. If “Did this change?” is “YES” notes for changed sections should be provided.

The bottom line final “Cash to Close” is the money you will need in-hand in three business days.

If your transaction has a Seller the summary table will show a line by line comparison of Borrower to Seller transaction details.

If there is no Seller you may see a Payoffs and Payments table instead.

Review the summary tables to understand the transaction and your financial commitments at loan consummation.

Understanding Your Loan: Closing Cost Details

 

Page 2 of your Closing Disclosure details specific closing costs.

Section A includes: Origination charges collected by the lender Origination fees paid to brokers, loan officers or other parties and Discount Points – prepaid interest. These figures should match your original Loan Estimate.

Section B covers services for which you could NOT shop. The total of these should be within 10% of the total from your Loan Estimate.

Section C covers services you could shop. If you chose providers from the lender’s written list, costs should be within 10% of Loan Estimate. The set of services you can shop may vary on different loans.

The Recording Fees in Section E should be within 10%; other costs in E, plus F, G and H, may vary from your Loan Estimate without tolerance limits.

This page will also break out the costs YOU will pay, before or at closing; the costs the Seller will pay, any costs paid by others and any credits from your Lender.

Your Rights And Rules For Closing Disclosures

 

The Closing Disclosure documents the actual terms of your loan transaction. You should receive it no later than 3 business days before consummation. It must be in writing – paper or digital.

If the loan terms or costs change prior to consummation, your lender must provide a corrected disclosure AND an additional 3-business-day waiting period until loan consummation.

Waiving the 3-day waiting period is only permitted in certain circumstances, and only when the waiting period would cause a bona fide personal financial emergency.

Understanding Loan Estimate Comparisons

 

Page 3 of your Loan Estimate includes measures to help you compare loans.

“In X Years” shows the total amount you will have paid in that time, and the dollar amount applied to your loan principal. The ratio between total paid and principal reduced may change over time.

The APR shows interest PLUS fees as an annual ratio – APR is the actual percentage this loan costs per year.

The TIP figure relates the interest you will pay over the life of the loan to the loan amount. For example – a TIP value of 25% on a $100,000 loan means you will pay $125,000 – $100K principal plus $25K interest – over the life of the loan.

Calculating Your Cash To Close

 

Page 2 of the Loan Estimate provides the current ESTIMATED cash to close. Some costs will stay the same between estimate and closing. Some will change.

  • A – Origination Charges – should match.
  • B – Can’t Shop – 10% Tolerance
  • C – Can Shop – no tolerance limit, BUT IF you select a provider from your lender’s list their actual cost should be no more than 10% greater than the estimate.
  • E – Recording Fees are also subject to 10% tolerance
  • F – Prepaids, G – Initial Escrow and H – Other, such as Owner’s Title may vary from the Loan Estimate without tolerance limits.

These estimates of closing costs plus loan details, Down Payment, Deposits Credits and Adjustments are used to calculate your estimated cash requirements when the loan finally closes. Consider the possible changes and tolerances when evaluating a loan decision.

Understanding Your Loan Estimate: Other Costs

 

Real estate transactions require taxes, certain pre-payments, and escrow funding.

Recording fees are charged by government agencies for keeping legal ownership records, while “transfer taxes” may be imposed by states, counties and municipalities on real estate ownership transfers.

Prepayments may include homeowner’s insurance premiums on the property mortgage insurance, if required property taxes for a period of months in advance, and prepaid interest, typically for the period from closing to the first mortgage payment.

Escrow funding may also be required against future annual charges for homeowners insurance, mortgage insurance and property taxes.

Title insurance on YOUR legal ownership – “Owner’s Title Policy” – may be designated as optional, which only indicates that it is not required by this creditor.

Some of these “Other Costs” may vary substantially between Loan Estimate and Closing Disclosure ask your lender about the tolerance rules or watch the video “Could My Loan Cost Exceed The Loan Estimate?”