Know Before You Owe: Anticipating TRID Changes

What is TRID, and do I even care? As a buyer looking to purchase a home with financing after October 3rd 2015, this will affect you!

TRID is an acronym for TILA (Truth in Lending Act), RESPA (Real Estate Settlement Procedures Act) Integrated Disclosure Rule. It combines existing disclosures with new requirements from the Dodd-Frank Act in order to improve consumer understanding of the mortgage process.

It is designed to allow borrowers to “shop” loans in order to decide which mortgage would work best for them.

I won’t bore you with a detailed summary of the 90+ page document, but will focus on the highlights.

TRID will require lenders to give buyers 10 days from receiving a Loan Estimate (which replaces the Good Faith Estimate and Truth in Lending form) to decide from which bank to choose.

The new Closing Disclosure form will be submitted to consumers 3 days before closing. Have you ever had your final HUD-1 appear at the closing table, or only a few hours before? No more!!

All these extra days are great for buyers to have more time to thoughtfully consider their lending options. What is important for buyers (and sellers) to realize is that there will need to be 45 days from binding agreement date to closing. 30 day closings will be nearly impossible under these new requirements.

Lastly, lenders are no longer allowed to ask borrowers for the critical information they need to pre-qualify a loan. In today’s Nashville market, many sellers are requiring a pre-approval letter (the phase after pre-qual) and/or proof of funds to accompany an offer. This will be a difficult transition. To expedite your loan approval, be prepared to submit your two most recent pay stubs, two most recent W2 forms, and the last two years of tax returns.

With all of these changes in mind, you can “Know Before You Owe” and enjoy a smoother transaction.