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.
Have you heard the term “Equity” before and wandered what it actually means? In short, Equity is the value YOU own in property such as a house. It’s the difference between what’s OWED and what the property is WORTH in the current market.
In the example this video shows – if you have a house in Fort Myers or Cape Coral worth $300,000 today and you owe the bank $200,000. Your equity would be $100,000.
If the house is valued at $500,000 in five years, and you still owe $150,000 your equity will be $350,000.
Equity grows if the property value goes up or if the amount owed goes down. The key thing to remember, simple as it sounds, is that you “own” increases in value. The bank’s loan doesn’t go up if the home’s value goes up.
Equity in a home can be used as collateral for loans but a house is not a piggy bank. Home equity can become a key financial asset over time; treat it wisely.
More questions about understanding Equity in Fort Myers, Cape Coral and other surrounding areas? Give Title Junction a call at 239.415.6574.
In case you missed it, check out our last Title Junction post for finding information on Schools and Community Resources in the Fort Myers and Cape Coral areas.
Often times we at Title Junction get asked about how to find more information about schools and community resources. One of the easiest ways to do that is to contact the Chamber of Commerce for either Cape Coral or Fort Myers for promotional literature or talk to your real estate agent about welcome kits, maps, and other information.
You can get information about school systems by contacting the city or county school board or the local schools. A good place to start for more information on schools in the areas of Cape Coral and Fort Myers is the Lee County School Board.
You may also want to visit a Lee County library branch. It can be an excellent source for information on local events and resources and the librarians will probably be able to answer many of the questions you have.
More questions about Community Resources and Schools in the Fort Myers, Cape Coral, and other surrounding areas? Give Title Junction a call at 239.415.6574.
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.
Measuring your existing debts against your existing income is one part of a lender’s required assessment of your ability to repay a loan.
Like the video says: debts are existing financial commitments; a car payment is a debt a grocery bill is not.
To calculate your debt-to-income ratio add up your monthly debt payments and divide them by your GROSS monthly income. (Gross income is generally the amount of money you earn BEFORE taxes and other deductions.) The Federally-established debt-to-income target is a maximum of 43% for Qualified Mortgages.
If your ratio is higher there may be other loans available – however, there may also be additional questions to establish your ability to repay, and the rates may be different than those available for Qualified Mortgages.
Studies suggest that a high debt-to-income ratio puts a homeowner at greater risk of challenges making monthly payments. So consider your situation and risks carefully before exceeding that suggested ratio.
What are the “Ability to repay” rules about?
In a nutshell, as this video shows, new laws require lenders to make a good-faith assessment of a borrower’s capacity to pay back their loan over time.
It’s a longer-term view that goes beyond immediate income, debt and credit rating.
These new Federal laws- supervised by the CFPB – require lenders to ask more questions –
about income, assets, employment, credit history, and monthly expenses –
as they relate to the proposed loan.
For example, a lender offering a mortgage with a low initial rate must try to assess how a borrower will handle the later, higher rate as well.
If you’re applying to borrow ask whether the program you’re considering is a Qualified Mortgage
Ability-to-repay rules are built in to loans that meet Qualified Mortgage guidelines.
As this video explains, Federal laws put into effect in 2014 and supervised by the Consumer Financial Protection Bureau define lending practices and loan terms for a new category called “Qualified Mortgages.”
They provide stable loan features for consumers and improve legal protection for lenders who follow the guidelines.
These guidelines require lenders to assess each borrower’s ability to repay their mortgage loan.
As of 2014, guidelines require that a borrower’s monthly DEBT – including mortgage – be no higher than 43% of their monthly gross INCOME
The laws also define unacceptable loan terms:
- interest-only loans
- terms over 30 years
- negative-amortization loans that increase principal over time
- most balloon loans
do not meet the Qualified Mortgage guidelines.
The laws aim to provide consumers with objective guidance about reasonable debt from the CFPB and in return, to grant lenders who follow that guidance with higher levels of protection from lawsuits.
Ask your lender about Qualified Mortgage options for your home purchase.
Mortgage rates change constantly through an unpredictable combination of government policies and economic conditions. This video explains the common term ‘rate lock.’
A “Rate Lock” is a guarantee that a lender will honor a specific combination of interest rates and points for a given period of time. A lock protects a buyer from rate increases but commits them to a higher rate if mortgage rates fall below the locked rate.
As of 2014, rate locks aren’t usually an option until a purchase offer for a specific property – new-home or resale – has been accepted by the seller. The borrower’s credit score, the loan-to-value ratio property type, location and other factors plus, of course, market rates and market conditions will also affect rate-lock decisions.
Decide whether to lock or “float” based on your capacity for risk and your best rational knowledge about construction and closing schedules. If your rate lock expires an extension might be available but both you and the lender will be looking at current mortgage rates to decide the best option.
What Is A Certificate of Eligibility, or COE?
The COE is the key document that verifies to lenders that someone is eligible for a VA-backed loan.
Servicemembers, Veterans and National Guard and Reserve members may apply online or through their lender; most lenders have access to the system and can verify eligibility IF the VA has records on file.
The VA also maintains a hotline for assistance.
Surviving Spouses can use VA Form 26-1817 to request determination of their eligibility for VA Loan Guarantees.
Your lender may be able to assist with processing or contact the VA for information this video did not address.
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.