A guide to TILA-RESPA Integrated Disclosures (TRID)

If you’re researching home mortgages, you might encounter the term “TRID” or the phrase “know before you owe.” These are disclosures aimed at protecting borrowers when taking out a mortgage, because a mortgage is such a major financial obligation.

TRID is an acronym that stands for TILA-RESPA Integrated Disclosures and requires lenders to provide two critical loan disclosures within specific timing requirements. These loan disclosures are intended to protect borrowers by ensuring they have enough time to review vital mortgage information before closing.

Let’s explore how TILA-RESPA Integrated Disclosures help borrowers compare costs, review loan terms, and make informed financial decisions. A greater understanding will help you know what your lender is legally required to disclose.

What is TRID in real estate?

TRID guidelines were created to ensure home buyers understand vital information about their mortgages, such as fees and loan terms. They are enforced by the Consumer Financial Protection Bureau and are intended to help home buyers make informed decisions before making an offer on a house or closing on a home.

Since 2015, lenders have been required to provide borrowers with two documents: the Loan Estimate and the Closing Disclosure. TRID standardizes mortgage disclosures, protecting consumers by making the process easier to understand and avoiding excessive or confusing paperwork. TRID in real estate also dictates when borrowers receive certain information, allowing them adequate time to shop around for other mortgages and understand the financial obligations of the mortgage.

What disclosures does TRID require?

Borrowers must receive two key documents when applying for a mortgage: the Loan Estimate and Closing Disclosure.

The Loan Estimate

The Loan Estimate, formerly known as a good faith estimate, includes information on the estimated costs of the loan, including monthly payments, interest rate, loan amount, and fees. It indicates if the loan has a prepayment penalty or an adjustable interest rate.

You should receive this within 3 business days of applying for a home mortgage for a given property. Although getting preapproved for a mortgage can be helpful for understanding what you qualify for, you won’t receive a Loan Estimate unless you apply for a loan on a specific home. It helps you compare offers, avoid surprises and misunderstandings, and provides a snapshot of what to expect if you move forward with the loan.

It’s a good idea to get a Loan Estimate from several lenders and compare your options side by side. If you do this within a relatively small time window, it will have a minimal impact on your credit score because home buyers often shop around for mortgages.

The mortgage lender cannot significantly alter the terms of the loan, but some details may change a bit. For example, if interest rates shift, then your rate may change.

The Closing Disclosure

You should receive the Closing Disclosure at least 3 business days before closing. This document confirms the final details of your mortgage, including the maturity date, closing costs, and any changes from the Loan Estimate. The Closing Disclosure includes the loan amount, interest rate, closing costs, APR, and other terms.

It’s smart to compare the Closing Disclosure with the Loan Estimate to make sure the terms remain the same and address any inconsistencies with the lender. TRID limits how much fees can change without issuing a new disclosure, which could delay your closing.

What are the TRID rules and guidelines?

Lenders must follow TRID guidelines, which were created to protect home buyers and promote transparency.

• No application fees: Mortgage lenders cannot charge any fees before providing the Loan Estimate, except a reasonable fee to run your credit.
• A quick Loan Estimate delivery: The lender must provide the Loan Estimate within 3 business days of receiving a complete loan application. Your mortgage loan originator can help explain the details in your estimate and answer questions about loan terms, interest rates, and fees.
• Maintenance of disclosures and estimates: The lender must keep a copy of the Loan Estimate for 3 years and the Closing Disclosure for 5 years after you sign the loan.
• 3 days to review Closing Disclosure: The lender must provide the disclosure at least 3 business days before signing, so you have time to thoroughly review all the information.

What does TRID mean for home buyers?

TRID is a set of rules created to protect home buyers by requiring lenders to provide clear, accurate information. It is intended to make it easier for borrowers to understand loan terms, compare various offers, and have adequate time to review critical information. This helps ensure that home buyers have and understand key information before making a significant financial decision, such as buying a home.

TRID requirements also affect the mortgage loan process for borrowers and require borrowers to sign an “intent to proceed” document. The lender cannot proceed with the loan without this. Lenders often request that borrowers acknowledge receipt of loan disclosures. These steps are designed to protect you during the closing process on a house.

How does TRID affect home sellers?

TRID is intended to protect borrowers during the mortgage process and does not directly impact home sellers. But a delay in the loan process or if a lender is in violation of TRID can postpone a closing date.

Lenders often estimate it takes 45 – 60 days to close on a mortgage, partially due to mandatory waiting periods and disclosure timelines. Home buyers should communicate with their lenders and acknowledge receipt of all disclosures to prevent delays.

What is the history of TRID?

Although TRID guidelines took effect in 2015, lenders have had to follow some guidelines for several decades. TRID combines two previous regulations into one: the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA).

The Truth in Lending Act

The U.S. government introduced TILA regulations in 1968 to prevent dishonest and unfair lending practices. TILA requires borrowers to receive written information on loan payments and interest rates before signing a loan agreement.

Although TILA doesn’t dictate how much lenders can charge in interest, it ensures that borrowers can easily find the interest rate a lender offers, allowing them to compare loan offers.

The Real Estate Settlement Procedures Act

RESPA is designed to protect borrowers by regulating closing costs and preventing unfair real estate lending practices. It requires lenders to provide specific information about mortgage costs and real estate transaction expenses. This allows you to accurately determine your costs and fees before closing.

This law also prohibits kickbacks and commissions that can boost the cost of a loan and regulates escrow accounts where funds are held by a third party and released under specific circumstances. RESPA regulates loan-related escrow accounts and limits how much lenders can require up front to cover property taxes and insurance.

The bottom line: TRID is helpful to understand when shopping for a loan

Taking out a mortgage is a huge financial commitment, and it’s critical to know what you’re agreeing to before signing. TRID helps protect borrowers during the home buying process by ensuring you have enough information to compare loan offers and understand critical loan information, like the interest rate and fees.

Obtaining multiple Loan Estimates is beneficial, as it allows you to compare offers and select the best option.

If you’re ready to buy a home, start the mortgage process today.