If you’re planning on buying a home this fall, you’ll likely see two new forms along with some new procedures surrounding the loan-closing process – as mandated by TILA-RESPA Integrated Disclosure Rule, or TRID.
According to a recent article on AZ Central, the new documentation will mean a more transparent lending process, as the new Loan Estimate Disclosure Form outlines more interest rate information. Homebuyers will be able to see the loan interest rate, the APR, and the “Total Interest Percentage, [or] the total amount of interest paid over the term of the loan as a percentage of the loan amount.”
The second document, the Closing Disclosure, reveals “transaction terms and costs and must be received by the borrower three business days before he or she signs loan docs.”
The Loan Estimate Disclosure is received three days after the completion of a loan application, and requires a seven-day waiting period before the borrower can sign, aimed at giving the buyer more opportunity to shop around and find the best rates.
The stipulations of TRID are very beneficial towards the consumer, as many homebuyers – pressured by closing dates – forgo reading parts of the documentation to save time. The mandatory seven and three-day rules gives the buyers time to compare other mortgage rates and be sure that they have all of the information necessary to make an informed decision about the financing of their prospective home.
However, some are worried about the possibility of delays concerning mortgage applications when timing rules like these are put into play. A loan approval that previously took a month could potentially take longer.
Nevertheless, the new forms themselves are proven to be much easier to understand than their predecessors. According to the Consumer Financial Protection Bureau, the entity charged with creating TRID, a quantitative validation survey was used to determine ease of use. According to CFPB, “Participants provided more correct answers about a sample mortgage using the new forms than they did using the current forms.”
To learn more about TRID, please visit the CFPB website.