US consumers are protected from being abused with fees through the two new regulations. The TILA (Truth In Lending Act) and the RESPA (Real Estate Settlement Procedure Act) respectively protect the consumers from abusive closing costs and inter-services referral fees.
The Consumer Financial Protection Bureau enforces the said regulations and last October 3rd, the CFPB combined all the necessary mortgage rates and fees in two easy forms so that consumers could easily understand what goes in their mortgages. This move is simply called the TILA-RESPA Integrated Disclosure Rule or the TRID.
Here are the specific compositions of the regulation:
1. Loan Estimate And Closing Disclosure
The Loan Estimate is something that you should be given within 3 days of your loan application. It replaces the Good Faith Estimate and Truth In Lending disclosures that home buyers used to be provided with. The Loan Estimate details all the terms the loan comes with and it also projects the payments to be made over the life of your loan, alongside the closing costs.
Furthermore, the Closing Disclosure is something that should be given to you at least 3 days before the closing day. It replaces the final settlement statement of HUD/HUD-1. It is similar to the Loan Estimate but it includes an outline of expenses made by the buyer versus seller and versus third parties. This gives you the opportunity to review the terms and you will also have at least three full days to absorb all info before you get to the closing part.
Ensure that you understand everything in the documents including the timing rules. Also, if you ultimately agree to close the deal after the three day period, you're gonna have to sign a few loan docs, including these:
Promissory Note
This document shall be your loan contract and it will contain all your loan terms like your 30 year fixed or 5 year ARM. Your rate, payment interval, future payment changes among other things will be specified in here as well.
In this note, you will also agree that the property is security for the mortgage and your lender has a claim to your home if you are not able to repay according to terms. This note will furthermore refer to another document called the mortgage or deed of trust.
The "Mortgage" Or "Deed Of Trust"
Both the Mortgage and Deed Of Trust state that the property is a security for the note. Some states require a Mortgage and some require a Deed Of Trust and you can refer to Fannie Mae's list to know which one your state requires.
Depending on what loan you are having, you would need to comply with one of the below-mentioned occupancy provisions:
Owner Occupied
This requires you to move into the said property within two months of closing and live in the home as your primary home for at least a year. Only after that specific period of time would you be allowed to rent the home out to someone else.
Second Home
This means that your property can only be lived in as a second home and at the same time, the property also isn't allowed to be rented out.
Non Owner Occupied
For this loan, you're gonna have to pay a higher rate. But it allows you to freely convert the occupancy type to owner-occupied or second home whenever you deem fit.
